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Tuesday, 27 March 1984
Page: 708

Senator HARRADINE(4.28) —I wish to address my remarks directly to at least one clause of the Income Tax Assessment Amendment Bill (No. 5). I do not wish to debate all the issues raised either today or the last time this matter came before the Senate. I shall simply raise two matters, one of which was raised by Senator Missen. He wondered why the Government did not take the opportunity that this Bill afforded it to address itself to the very real question that I raised on 25 May 1983, which dealt with bushfire relief donations and tax deductions. I asked the Minister for Resources and Energy, Senator Walsh:

Is the Minister representing both the Treasurer and the Minister for Finance aware of the different attitude being taken by the Australian Taxation Office in relation to donations of cash as distinct from donations in kind for the victims of the Victorian and South Australian bushfires? To give an example-

this example was given in a letter written to me-

there was an appeal for fodder and dairy cattle for the farming victims and a number of dairy farmers, including Tasmanians, made contributions of dairy cattle. Is it a fact that the Australian Taxation Office has decided to interpret certain provisions in the Income Tax Assessment Act so as to require farmers who make donations of farm produce and livestock to charitable appeals to pay tax on the value of such gifts? If so, is that not distinct from the attitude of the Commonwealth in respect of these appeals?

The Minister, in his reply, said:

In reply to the first part of Senator Harradine's question, I am not aware of what distinctions, if any, the Taxation Office is drawing between donations of cash and donations in kind. I will seek that information from the Minister. I can, however, see that an argument could be mounted for making a distinction between the two types of donations. Expenses incurred by a farmer in producing the two commodities that Senator Harradine has cited-fodder and animals-have been tax deductible. If, in addition to that, the item that was donated was allowed as a tax deduction at full market price there would be an element of double counting. Whether that is the basis for the Taxation Office's distinction , if in fact it draws such a distinction, I do not know. But I just raise the point that that could well be the case. I will seek a definitive answer from the Minister.

No response from the Minister has been forthcoming to me. Of course, that reference by Senator Walsh is an inadequate basis for any distinction to be made between donations in cash and donations in kind. I mention to the Senate that I was not the first person to raise this question, although at the time I thought I was. The honourable member for Murray, Mr Bruce Lloyd, actually raised the matter in the House of Representatives on 21 April. I raised it on 25 May, Senator Missen raised it with the Minister on 28 July, and on 24 August Senator Chipp proposed a private members Bill to remove this serious anomaly. In his response to the second reading stage, I would like to hear what the Minister has to say about this anomaly.

The second matter I wish to raise today relates to clause 5 of the Bill. In his second reading speech, in relation to the amendment to clause 5, the Minister for Social Security (Senator Grimes) said:

This amendment is directed against a particularly distasteful tax avoidance practice containing clear elements of fraud against both the revenue and unsuspecting employees. It will, in accordance with the Government's announced policy in relation to blatant tax avoidance practices, apply with retrospective effect from 1 July 1977.

He went on to talk about the schemes and then said:

This is done in circumstances where the accumulated assets of the funds are paid out, not to the employees, but to the proprietors of the business concerned . The procedure is possible because employees are either not informed of their rights under the superannuation scheme or have their employment terminated in circumstances where they become disentitled to benefits from the fund.

What does the Government do? It does nothing about the affected employees. All it proposes is to introduce retrospective tax legislation to benefit the Treasury. I foreshadowed on 6 March 1984 that I would move an amendment-it has been circulated-to the second reading motion which will go to this very question . I move:

At end of motion, add:

'and (a) that clause 5 of the Income Tax Assessment Amendment Bill (No. 5) 1983 be referred to a Select Committee to inquire into and report upon the adequacy of the clause, particularly in relation to the overriding need to redress any financial disadvantage which might have been suffered by unsuspecting employees who were ostensibly the beneficiaries of a superannuation fund but were disadvantaged either by not being informed of their rights under the superannuation scheme or had their employment terminated in circumstances where they became disentitled to benefits from the fund;

(b) that provisions relating to membership, powers and proceedings of the Committee be contained in a subsequent Resolution.'.

I consider that this amendment is the logical outcome of all the arguments that have been advanced by the Government for the amendment contained in clause 5 of the Bill. Indeed, the wording of my amendment follows very closely the arguments that were advanced in the second reading speech and the words which were used by Senator Walsh in his speech in reply to Senator Chipp's motion. Quite obviously, if the Bill is enacted and the money goes into the Treasury, the ability of the funds to compensate the persons affected will be substantially reduced.

The question that the select committee would have to consider is what remedies are available to the employees concerned. One of the things that would need to be ascertained is how unsuspecting employees would be able to be advised of the fact that they were ostensibly beneficiaries of the superannuation fund. Clearly , the Commissioner of Taxation is in a position to ascertain the names of beneficiaries of a fund; in fact, under section 23F (2) (e) of the Income Tax Assessment Act the Commissioner is so informed. Furthermore, there appears to be a strong possibility that with the new lump sum taxation arrangements trustees will be required to deduct tax at source before paying a benefit. Therefore, trustees will be required to furnish regular returns to the Commissioner of Taxation, providing such details as names of beneficiaries, amounts, salary, date joined, service, et cetera.

The other aspect is the question of remedies available to the employees. Clearly, in New South Wales some limited remedies are available. The New South Wales Employment Protection Act of 1982 is relevant. Apart from compelling employers to give notice of and provide details of retrenchment, the New South Wales Employment Protection Act 1982 empowers the State Industrial Commission to order various kinds of severance payments to retrenched employees, including gratuities and superannuation payments above the normal entitlement. With regard to superannuation benefits, the Industrial Commission of New South Wales may make orders under the Act requiring, firstly, the payment of benefits from a superannuation scheme of which the employee is a member, as if the benefits ordered to be paid were provided by the scheme. That is contained in section 14 (1) (d) of the Employment Protection Act. It may require, secondly, the payment of an amount to the employee to compensate him for any loss of accrued benefits under a superannuation scheme of which he is a member. Section 14 (1) (e) of the Act refers to that.

As I said, there are limitations to this even in the New South Wales Employment Protection Act 1982. The limitations are that the employee would need to be aware of the fund's existence and of his entitlement under the scheme. That addresses the first matter that I mentioned, and it is one of the reasons why I wish to have such a select committee established. Of course the Act applies only to New South Wales awards. It also applies only where there are 15 employees or more. To my knowledge as yet no other States have similar legislation, although Victoria tried to bring down similar legislation but it was held up in the Legislative Council. I understand South Australia is also examining the possibility of such legislation.

The simple point I am making is that a select committee established by the Senate would be able to identify what might be available to affected employees and it could make recommendations which are more in keeping with the reasons that were advanced by the Government for clause 5 than in fact are contained in clause 5. I commend the amendment to the Senate and hope that it is carried. Incidentally, I propose to move a consequential amendment in the Committee stage and copies of that amendment have been distributed to honourable senators.