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Thursday, 5 December 1985
Page: 3000


Senator MESSNER(12.11) —I move:

(2) Clause 9, proposed new section 51AE, leave out the section, insert the following section:

`51AE A deduction is not allowable under sub-section 51 (1) in respect of an entertainment expense incurred, except in respect of an entertainment expense which the Commissioner is reasonably satisfied is directly attributable to gaining or producing assessable income or directly attributable to the purpose of gaining or producing assessable income.'.

I shall restate the amendment so that we know what we are talking about, and especially for Senator Elstob's benefit, because he has obviously missed the point entirely. The amendment states that a deduction for entertainment expenses:

. . . is not allowable under sub-section 51 (1) in respect of an entertainment expense incurred, except in respect of an entertainment expense which the Commissioner is reasonably satisfied is directly attributable to gaining or producing assessable income or directly attributable to the purpose of gaining or producing assessable income.

The point is quite clear. The Opposition does not support any abuse of entertainment expenses in any form whatsoever. The whole point of this amendment is to ensure that the only deductions that would be allowable for tax purposes for entertainment are in respect of legitimately incurred expenses that lead to the generation of assessable income. That clearly answers the point that Senator Elstob was trying to make during his tirade. All Government senators, even the Treasurer (Mr Keating) and even Senator Walsh in his saner moments--


Senator Puplick —Which saner moments?


Senator MESSNER —There are not many of them-time and again have told us that there are expenses which are legitimately incurred in earning assessable income and that they should be allowed as a deduction. But then they go on to say: `We are not going to allow any expenses even though they are legitimately incurred, because we do not believe that we can control the situation'. Our amendment would give those who administer the law the framework and opportunity to be able to decide what kinds of expenses should be allowed, and it would leave the administration of that to the Commissioner of Taxation. That is the thrust of our amendment. That is precisely how the law ought to be administered. It ought to be simple and clear to people as to how they should incur expenses in the earning of income, so that they can make a decision on that basis and then claim them as a deduction. As to whether it is a properly incurred expense, it is the job of the Commissioner of Taxation to ensure that he is allowing only those deductions properly incurred, and that is the job of the advisers.


Senator Maguire —That is a job creation scheme.


Senator MESSNER —No; Senator Maguire does not have to take my word for it; he can take the Commissioner's word for it. He should look at the report of the Commissioner for Taxation for the last financial year. Next year, the Commissioner will introduce a new system of assessment called self-assessment. He will also set up more and more people to undertake checking procedures and audit in relation to the self-assessment procedures. This is going in precisely the opposite direction to what Senator Maguire and his Government are trying to put down here. I support what the Commissioner of Taxation is doing, as spelt out in his report, because that is the proper way to go in the administration of taxation law-not the confusion of stupid thoughts, the mishmash of a dog's breakfast, in this legislation.

That is the point of the Opposition's amendment. We want to ensure that the legislation is proper and that people who properly incur expenses do so in the knowledge that, under the normal procedures of checking by the Commissioner of Taxation, they will be allowed expenses.

There are many reasons other than those as to why the Opposition is taking such a strong stand on this matter, which is one of great principle. The Government would trivialise and has trivialised the argument by talking about whether people get a free lunch, and so on. That is not the question. What is at issue here is whether a government can tell people in what way they are to generate their own incomes. Having introduced this form of legislative control over tax deductions, where will the Government stop next? Perhaps next week it will introduce a prohibition on advertising. That expense, in the same way as any other expense, cannot be checked according to the Government's rules, and that would be in the same situation, because it may not be directly related to the generation of income.

So it is with travel expenses. People who go to call on customers in order to generate income may not get an immediate response from that customer, but perhaps from a second or third call they may. Is the Government now going to disallow the cost of that first call? Is that the kind of thinking that runs in the back of the Government's mind? I am sure it is. So we can expect that this measure is merely the thin edge of the wedge as far as this kind of measure which the Government is proposing is concerned.

Clause 9, of course, sets down the general provisions with regard to non-deductibility of entertainment expenses and is really quite confusing in many of the issues it raises. But I suppose that the most absurd provision of all is where it says that a deduction for entertainment will not be allowable except where that entertainment is made generally available to the public. In what way can that be related to the income generation of the business or of the taxpayer? I ask the Minister in what way he can relate the general principles of the tax law to that kind of proposition. It seems to me to be absurd that the exclusions in sub-section (d) (ii)-such people who cannot attract the entertainment deductions-are the very people who are most likely to generate income for the taxpayer. The exclusions are-would the Committee believe?-clients and customers. We can get a deduction for entertainment of the general public, but we cannot get a deduction for clients and customers-the very people upon whom we rely to generate income. How on earth can the Minister justify his position in relation to the general principles of the law? How can he answer that?

The Government then says that journalists are to be excluded from the allowance of entertainment expenses. Surely, if a business is out to try and expand its capacity and its clientele, it needs the media to extend that idea across the community. Yet, we exclude the very people who can give businesses the opportunity of expanding their incomes, upon which they pay tax. It is just incongruous. It is totally ill thought-out and based on misunderstandings of the general principles of the law and has no relationship to proper thinking. The rest of this clause is shot through with that kind of stupidity. It is full of that kind of poor thinking, which is based on egalitarian thoughts of a confused mould. The Government obviously has no appreciation of just what it intends with this law. It has sought to use as a scapegoat one particular section of the economy because it believes that it can make out a political case against that group and make is sound plausible. That is the reason for the attack on entertainment expenses. That is why every day the Minister refers to the free lunch which, of course, is nothing of the kind and which is contributed to by the individual concerned; albeit a deduction is allowable.

The Treasurer continually refers to entertainment as a tax shelter. Of course it is not a tax shelter. By the general principle of the tax law, what is deductible to one person is taxable to another. Entertainment falls exactly into that category, in that a deduction that might be allowable to a taxpayer would mean income to the restaurateur, the supplier of food or services, or the employee who works as a waitress in that restaurant. Obviously, there is no tax shelter at all involved in this. It is a normal commercial kind of operation where deductions are allowable on one side and income is assessed on the other. That is obviously, again, a total misunderstanding on the part of the Government of the general principles of taxation.

The Opposition has moved an amendment to this clause. It now seems obvious that it will fail because only Senator Vigor of the Australian Democrats has the courage to face up to the real issues in this debate. I wish him well in his future political career.


Senator Chipp —No one is frightened of you. You are the least frightening person in this place.


Senator MESSNER —I thank Senator Chipp. The Democrats are supporting what is an oppressive, ill thought-out piece of legislation which has absolutely no basis when considered against the general principles of the tax law.