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Wednesday, 16 October 1985
Page: 1304


Senator WALSH (Minister for Finance)(11.35) —I was not able to be present for most of either the first or second reading debate on the Taxation Laws Amendment Bill (No. 2) 1985, the Income Tax (Individuals) Bill 1985, the Income Tax (Companies, Corporate Unit Trusts and Superannuation Funds) Bill 1985 and the Medicare Levy Bill 1985, but I understand that Senator Walters and Senator Michael Baume both raised the question of the Medicare levy and drew attention to the fact that the Medicare levy was not actuarily based. That is, of course, correct. It was never intended that it be actuarily based any more than it was ever intended that the premiums charged by the private health funds be actuarily based. Indeed, the private funds insist on the community-rating principle. That, of course, is an explicit repudiation of actuarily based insurance premium assessment.

The Liberal Party of Australia, as I understand it, has always been a strong supporter of the community-rating principle but finds itself apparently critical of the application of the same sort of principle for the Medicare levy. That is an inconsistency which I leave Opposition senators to explain. It is not my responsibility to do so.

Senator Messner, at a more serious level, in his comments sought advice on a particular aspect of the non-leveraged finance lease measures. It concerned the type of expenditure on repairs to leased property which would, if incurred by the lessee, result in the lease being classified as a finance lease. In general terms, a finance lease exists where all, or substantially all, of the risks and benefits of ownership of property are transferred from the lessor to the lessee. One such risk of ownership is the requirement to repair property. The provision to which Senator Messner referred in relation to repairs is limited in its operation to leases for periods in excess of one year. Further, the reference to repairs is to those repairs that would usually be carried out by an owner of property if that property were the subject of a lease other than a finance lease; that is, they would generally be repairs of a capital nature. The concept of repairs does not extend to costs associated with general maintenance of the leased property. These costs could properly be borne by a lessee without the lease being classed, by that reason alone, as a finance lease.

In response to the question as to when the package of legislation pursuant to the tax reform will be introduced, it will be done as soon as possible bearing in mind that there is a heavy work load associated with the preparation and particularly, as I understand it, pressure on the parliamentary draftsmen, but it is being given a high priority. Other issues that were raised in relation to the application of capital gains tax on disposal of leased property will be covered in the relevant legislation.

Some comment was made in relation to the 10 per cent limitation on investment by an employer-sponsored superannuation fund in the employer's business. It was stated by the Government that that measure is for the protection of employees in the event of a business failing. The Opposition, however, suggested that it would prevent an employee sharing in an employer's success. There are other ways which an employer could devise of allowing employees to share in an employer's success if the employer chose to do so-for example, by direct acquisition of shares in the employer company. It should also be pointed out that the proposed rules are in accordance with the recommendation of the Commonwealth Task Force on occupational superannuation which stated:

. . . not more than 10 per cent of the assets (measured at cost) of an employer-sponsored fund should consist of equities in or loans to the employer's business or a related company and/or associated persons that are not at arm's length from the employer.

The provision in this legislation is consistent with the views of the Hancock National Superannuation Committee of Inquiry and, going further back, the Campbell Committee of Inquiry into the Australian Financial System and the Asprey Taxation Review Committee. The Hancock Committee recommended a maximum level of investment of 10 per cent. The Campbell Committee recommended only 5 per cent, though at market values instead of at cost, and the Asprey Committee recommended only very minor investment being permitted in the employer's business from employer-sponsored funds.

The Australian Democrats have given notice of an amendment to clause 29 of the legislation which I will not address now other than to say that the Government will not be accepting the amendment.

Question resolved in the affirmative.

Bills read a second time.