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Tuesday, 27 March 1984
Page: 727


Senator WALSH (Minister for Resources and Energy)(8.28) —It is very important to note for the record that the 26 honourable senators who just negated clause 5 have allowed, inter alia, the two Kellys and a few of their chosen cronies to keep the $1m plus of which they have deprived, not the Treasury, but honest taxpayers of Australia.


Senator Harradine —I raise a point of order, Mr Chairman. He cannot help himself , can he? What clause is he talking about?


The CHAIRMAN —He is talking about the remainder of the Bill.


Senator Harradine —I see.


The CHAIRMAN —Senator Walsh should address himself to the remainder of the Bill.


Senator Harradine —I mean that, if Senator Walsh wants to go on, I will answer him.


The CHAIRMAN —Order! Senator Harradine will resume his seat, please.


Senator WALSH —Well, you have not done too well now, Harradine. I would be interested to hear you explain why you who have no--


The CHAIRMAN —Order! Senator Walsh will address the Chair. He will confine his remarks to the remainder of clauses from clause 6 onwards.


Senator WALSH —Very well, Mr Chairman. The Bill as a whole is substantially devalued because of the vote that has just been taken. I know that some honourable senators have had consistent views on this subject and some have not. On behalf of the Government I seek leave to move three amendments as circulated together.

Leave granted.


Senator WALSH —I move:

(1) Page 5, clause 6, after proposed sub-section 26AH (1) insert the following sub-section:

'' ' (1A) Where a paid-up policy of life assurance is issued to a taxpayer in lieu of an eligible policy-

(a) the paid-up policy shall, for the purposes of this section, be deemed to be a continuation of the eligible policy; and

(b) no amount shall be taken for the purposes of sub-section (3) to have been re-invested or otherwise dealt with on behalf of the taxpayer or as he directs in connection with the issue of the paid-up policy to the taxpayer in lieu of the eligible policy.''.

(2) Page 6, clause 6, after proposed sub-section 26AH (6) insert the following sub-section:

'' ' (6A) Where-

(a) sub-section (5) would, but for this sub-section, apply to an amount (in this sub-section referred to as the ''relevant amount'') received by a taxpayer by reason of the forfeiture, surrender or other termination of the whole or a part of an eligible policy; and

(b) the Commissioner, having regard to-

(i) the total amount of premiums paid under the eligible policy;

(ii) the total amounts received by the taxpayer or by any other person under the eligible policy and the total amounts of bonuses included in the amounts so received;

(iii) the amount of the surrender value of the eligible policy at the time when the forfeiture, surrender or other termination occurred; and

(iv) such other matters as the Commissioner considers relevant,

is of the opinion that it would be unreasonable for sub-section (5) to apply to the relevant amount or to a part of the relevant amount,

sub-section (5) does not apply to the relevant amount, or to that part of the relevant amount, as the case may be.''.

(3) Page 46, clause 25, leave out proposed section 160AAB, insert the following section:

Rebate in respect of amounts assessable under section 26AH

'' '160AAB. (1) In this section, ''eligible 26AH amount'', in relation to a year of income, means an amount included in assessable income under section 26AH in relation to an eligible policy within the meaning of that section issued by a life assurance company to which Division 8 applies in relation to the year of income, not being a life assurance company the whole of the income of which is exempt from tax.

'(2) A taxpayer, not being a taxpayer in the capacity of trustee of a trust estate, is entitled in his assessment in respect of income of a year of income to a rebate of tax of an amount equal to 30% of any eligible 26AH amount included in his assessable income of the year of income.

'(3) Where-

(a) an amount is included under section 97, 98A or 100 in the assessable income of a year of income of a taxpayer being a beneficiary of a trust estate otherwise than in the capacity of trustee of another trust estate; and

(b) the whole or a part of the amount so included (which whole or part is in this sub-section referred to as the ''rebatable amount'') is attributable to an eligible 26AH amount included in the assessable income of the year of income of the trust estate or of another trust estate,

the taxpayer is entitled in his assessment in respect of income of the year of income to a rebate of tax of an amount equal to 30% of the rebatable amount.

'(4) Were-

(a) a taxpayer being the trustee of a trust estate is liable to be assessed and to pay tax in pursuance of section 98 in respect of a share of the net income of the trust estate of a year of income; and

(b) the whole or a part of that share (which whole or part is in this sub- section referred to as the ''rebatable amount'') is attributable to an eligible 26AH amount included in the assessable income of the year of income of the trust estate or of another trust estate,

the taxpayer is entitled in that assessment to a rebate of tax of an amount equal to 30% of the rebatable amount.

'(5) Where-

(a) a taxpayer being the trustee of a trust estate is liable to be assessed and to pay tax in pursuance of section 99 or 99A in respect of the whole or a part ( which whole or part is in this sub-section referred to as the ''relevant trust income'') of the net income of the trust estate of a year of income; and

(b) the whole or a part of the relevant trust income (which whole or part is in this sub-section referred to as the ''rebatable amount'') is attributable to an eligible 26AH amount included in the assessable income of the year of income of the trust estate or of another trust estate,

the taxpayer is entitled in that assessment to a rebate of tax of an amount equal to 30% of the rebatable amount.

'(6) Where an eligible 26AH amount is included in the assessable income of a partnership of a year of income in the calculation of the net income or partnership loss of the partnership of the year of income, a partner in the partnership is entitled in his assessment in respect of income of the year of income to a rebate of tax of an amount equal to 30% of the amount by which the taxable income of the partner of the year of income exceeds the amount that could reasonably be expected to be that taxable income if the eligible 26AH amount had not been included in the assessable income of the partnership of the year of income.

'(7) In the application of this section in relation to the year of income that commenced on 1 July 1982, references in this section to 30% shall be read as references to 30.67%.' ''.

The three amendments are all of a minor nature and deal with the short term life insurance provisions of the Bill. By way of background, the amendment proposed by clause 6 of the Bill removes the income tax advantages available to life insurance policy holders in respect of short term insurance arrangements. The provision gives effect, subject to an extension of the taxable period to 10 years for policies issued after 7 December 1983, to measures announced by the previous government on 27 August 1982. In announcing these measures, the then Treasurer proposed that bonuses or other proceeds paid under short term life insurance policies would become subject to tax, but only to the extent to which they exceeded premiums paid. It has been drawn to the Government's attention that the Bill as introduced may not fully achieve that in the case of traditional life insurance policies terminated within the extended taxable period. Where a policyholder terminates a traditional policy at a loss he or she may have participated in profits, by way of bonuses, and under the Bill be taxable on those profits.

Reflecting the variety of situations that may be encountered, the first amendment will overcome this unintended effect by providing that the Commissioner of Taxation may appropriately exclude from assessable income a part of a bonus which would otherwise fall to be taxed. The Commissioner is to have regard to such matters as total premiums paid on the policy, any amounts or bonuses previously received under the policy and the surrender value of the policy. In practice this will mean that bonuses will not be subject to tax under the new measures unless the total amount received by the holder or holders of a policy exceeds the premiums paid under the policy.

The second amendment will ensure that the short term life insurance measures specifically deal with the case where a policy holder decides to discontinue premium payments and applies for the issue of a paid-up policy in lieu of the original policy. Where a policy is, in effect, converted to a paid-up policy, it is not intended that any amount should, on conversion, fall to be taxed under the new measures. The amendment treats the paid-up policy for all purposes, including the ascertainment of the 10-year taxable period should the replacement policy itself be terminated early, as a continuation of the original policy. The third amendment relates to clause 25 which provides for a rebate of tax at the standard rate in respect of bonuses paid by a taxable life assurance company and which are, by virtue of clause 6, to be included in assessable income. The Bill as introduced does not cater for the case where a trust beneficiary or a partner has an amount included in his or her income as a result of the inclusion of an amount subject to the new measures in the assessable income of the trust or partnership. The amendment I propose will ensure that beneficiaries and partners in these circumstances are, as was intended, entitled to the rebate. I commend the amendments to the Committee. As far as I know, there will be not be any opposition to the amendments.