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Wednesday, 9 October 1985
Page: 903

Senator McINTOSH —Is the Minister representing the Treasurer aware of recent criticisms in the media about the Government's tax reform decision on quarantining farm losses? Is it true, as the critics suggest, that the Government's decision will hit genuine farmers?

Senator WALSH —The answer to the second part of Senator McIntosh's question is no. I went back to the country in Western Australia last weekend and I read the agricultural Press for the last few weeks-I do not read the agricultural Press as much as I used to-but I found that nothing much had changed. If people of a particular political persuasion want their prejudices reinforced and their preconceptions confirmed they could hardly do better than read the agricultural Press. If, however, they want information, they should go elsewhere.

The facts about the quarantining of farm losses are that a maximum of $15,000 of off-farm income will be allowed to be offset against a farm operating loss, plus-and this was the important fact which the agricultural Press, at least in Western Australia, failed to report-any net taxable farm income which had accrued in the previous five years. Clearly, that wipes right off the agenda the false assertions that have been made by various people that farmers who are hit by drought and are therefore forced to earn off-farm income will be adversely affected by this measure. Indeed, even without that additional concession of the accumulated taxable income over the previous five years, $15,000 is a good deal for someone to earn off the farm in a part time working capacity. It is quite a lot of money for a part time shearer or truck driver or a part time anything else.

Senator Ryan —Or a part time school teacher.

Senator WALSH —Or a part time school teacher, as Senator Ryan says. Those measures will, of course, affect some other people. Obviously if they did not affect somebody they would not raise additional revenue. One type of person who will be affected was pinpointed by the Countrywide program on 25 September. That program acknowledged the generosity of the $15,000 limit, but again failed to point out the add-on of the accumulated taxable farm income of the previous five years. The program also pointed out that the measures might affect high flyers, though unlikely to hurt the battlers. One such high flyer, literally, is a Qantas pilot who flies 747s in his spare time. He was interviewed on the same program. The interviewer pointed out that Captain Simpson, an international airline pilot, was earning more than Mr Keating-and probably more than the Prime Minister for that matter. This pilot shelters from tax on that income by using his farm. The interviewer asked whether the hobby pilot, who probably flies about only 10 hours a week incidentally, should deserve special treatment. Unashamedly the hobby pilot announced, and I quote:

I don't get the money, I conduit that money. It is an oxygen conduit to the local areas.

Sometimes I become cynical in this job, but my faith in human nature is restored every time I hear examples of such philanthropy-of a high income earner who actually could have put the after tax proceeds of his salary into his own bank account but who, for purely philanthropic reasons provides an oxygen conduit to the local area in which his tax shelter farm is located!

On the question of drought, I think it is also worth noting some facts for those ill-informed journalists and others-and the particular journalist I have in mind has always been noted for the strength of his ideological prejudices rather than his logic or his command of the facts. I refer to David Barnett, who referred recently to 1982-83 as being the end of a four-year drought. I must point out that within those four years the second and third largest wheat crops ever produced in Australia were harvested. The size of the wheat crop, or the wheat average, is about as good an indicator of drought as one can get, at least in southern and south-eastern Australia, from which areas the overwhelming majority of agricultural production comes. In closing, I have noted that the Leader of the Opposition in an interview on that same Countrywide program on 25 September said:

You've got to understand that in order to encourage people to invest in something, if it has a low return or may involve a high risk, you often have to offer some kind of tax inducement.

That was a comment made in defence of the present tax shelter status of agricultural investment. I note two points. The first is that if any industry yields a low return on investment, why would any responsible government want to encourage additional capital investment in that industry? Secondly, if the industry has a high risk it must have the potential to yield above average returns on capital in order to attract capital. It is the potential of above average earnings that ought to be used to attract investment in particularly risky industries rather than governments making judgments about the industries in which capital should be invested. The logical conclusion of that argument is that if people believe that governments are better able than private investors to pick the industries in which capital should be invested all industries should be nationalised. I do not know whether that is what Mr Howard is advocating, but that is the clear implication of his comment.