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Friday, 8 November 1985
Page: 1844


Senator WALSH (Minister for Finance)(12.35) —Regarding the matter Senator Messner raised, which he described as a loophole, I inform the Senate that I am not familiar with the letter he referred to, nor am I familiar with the facts. From the short briefing I have had, I think there has been some misunderstanding. If the circumstances were described completely correctly by Senator Messner, I think I would have to agree that there is a loophole. I will refer his comments to the Treasurer (Mr Keating) and see whether the Treasurer will respond to him directly.

In reply to the other matters, I have noted the Opposition's stated intention to provide incentives to take people out of the social security system. I note also that the incentives specifically supported by the Opposition are that payments into superannuation funds should be deductible from tax at the time they are paid in, that income earned within funds should not be subject to tax in the funds, and that the lump sums, when drawn, should be virtually tax exempt or taxed under the present rate schedule at a maximum rate of only 3 per cent of the lump sum. I have noted all that, including the fact that `incentives' in that context is a euphemism for a tax haven and that the degree of benefit which individuals may gain from it is directly related to the amount of money they can either put in themselves or exhort others to put in on their behalf.

I have also noted the Opposition's repeated renewed undertaking to repeal the assets test, which of course is quite inconsistent with the view previously expressed. The Opposition proposes this package: A tax haven should be made available ostensibly to provide a retirement income to get people out of the social security system. They would, however, be able to take almost entirely tax free a lump sum which they could then invest in some way which would yield little or no income and still come back into the social security system for a pension. The only people who would be excluded from the social security system under the Opposition's policy when it is looked at as a package are those who would be required to take genuine superannuation benefits as a pension instead of a lump sum. Indeed, the totality of what the Opposition proposes provides an incentive for people not to take themselves out of the social security system but to leave themselves in by converting a pension entitlement into a lump sum payment either tax free or virtually tax free.

The Income Tax Assessment Amendment Bill can be summarised, I think, in a couple of sentences. It removes some minor restrictions now adjudged to be unnecessary and it closes off an artificial scheme which has developed, through which approved deposit funds can be used as a means of avoiding future tax on the payment paid into them. I draw attention particularly to the warning given by the Treasurer on 22 August not only that that loophole will be closed but also that any future similar artificial schemes will be legislated against with effect from 22 August this year.

Question resolved in the affirmative.

Bill read a second time, and passed through its remaining stages without amendment or debate.