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Thursday, 20 October 1949

Mr HOLT (Fawkner) . - I take advantage of the committee discussion of the bill to place a matter before the Minister for Post-war Reconstruction (Mr. Dedman) as the lieutenant of the Treasurer (Mr. Chifley). I regret I was not present when he closed the debate on the second reading. It is possible that he covered, in part or wholly, the matter that I am about to raise. It was brought to my notice by the Australian Mines and. Metals Association (Incorporated), which, no doubt, has made representations to other members of the Parliament. The association requests that the provision extending the operation of section 57a for an additional period and increasing the allowance from 20 per cent, to 40 per cent, shall be applied to mining companies as well as to manufacturing companies. I understand a copy of the letter, from which I am about to read, was sent to the Treasurer.. The letter reads -

This Association has perused the Bill introduced by the Government on the 9th instant to amend the Income Tax Assessment Act by inter alia -

(1)   Extending the operation of Section 57a for an additional period of two years; and

(2)   Granting taxpayers the right to deduct an initial allowance of forty per cent, in lieu of twenty per cent, as already provided in that Section.

We understand that at the time of the incorporation of Section 57a in the Act in 1946 it was officially explained that this increased allowance was granted, with the object of offsetting the post-war inflated cost of new machinery, assisting the establishment of new enterprises and aiding secondary industries in securing overseas markets.

This provision has, of course, been of considerable immediate value to manufacturing industries, but such relief has not been received by mining companies, to which Division 10 of the Act is applicable, as no corresponding amendment has been made to Section' 122.

It is recognized that under Section 123 a mining company is entitled to deduct the total development and capital expenditure in the year in which it is incurred, but this provision is not always availed of as the large appropriations of profit necessary to qualify for the allowance would frequently leave an insufficient amount for the other requirements of these companies.

This position would clearly be accentuated with the existing inflated capital expenditure costs.

The alternative Section 122 is therefore in many cases applied and the deduction of such expenditure is spread over the estimated life of the mine.

It is accordingly submitted that, in equity, an amendment should also be made to this Division to grant mining companies an initial allowance in respect of capital expenditure and we suggest that Section 122 be modified to entitle a taxpayer, in respect of the years of income ending on the 30th June, 1950, 1951 and 1952, to elect to deduct either twenty per cent, or forty per cent, of the expenditure of the year as a special allowance, the residue to be amortized over the estimated life of the mine as at present.

The association asks that this matterbe examined while we are considering this legislation. I understand that the Government's view is that the mining companies may deduct the whole expense incurred on machinery and equipment in the year in which it is incurred. Perhaps the Minister made some reference to that point when replying to the secondreading debate, but, as the association points out, to take in that year, by way of deduction, the total cost of the machinery and equipment purchased might mean such a heavy inroad into the earnings for that year that it would not be a practicable proposition. Since the desire of the Government is to assist manufacturers and producers of various kinds in this way, I suggest to the Government that its advisers might confer with the representatives of the mining companies. If what the Government proposes does not meet the situation and if the alternative suggested by the mining companies would not involve the Commonwealth in any greater loss of revenue, it might be possible to comply with the request. It would not appear that the Commonwealth would lose for the companies can take depreciation only once, and it does not matter much whether they take it in one year or spread it over a period of years. If that aspect has not been fully considered, perhaps a conference between taxation officers and the representatives of the mining companies could be arranged by the Treasurer.

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