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Wednesday, 6 August 1930

Senator McLACHLAN (South Australia) . - I agree with what Senator Daly has said with regard to the first portion of paragraph c, but doubt arises in my mind as to the meaning of the words " carrying on or carrying out of any profit-making undertaking or scheme." Until it reaches that point the paragraph is only declaring the wellsettled law of Australia. These last few words, however, seem to extend the law further than it has hitherto been applied. A man buys a block of land on which to build a house. He buys it at the market value, and holds it for a time. After a period he finds that it is not convenient for him to build a home on it, and he sells it. While he has held the block it has increased in value. Clearly the difference between the purchase price and the sale price is accretion of capital. I ask whether the words " profit-making undertaking or scheme " will cover . a transaction such as this, which has hitherto been held to be outside the pale of the present taxation law?

Senator Rae - Should not the land speculator be taxed?

Senator McLACHLAN - The land speculator is already taxed ; so also is the man who is not a speculator, but buys land for the purpose of making a profit. It has been shown in a variety of ways that a man who has bought land, and made a profit on it, simply because he has held it for some time, is not liable to income taxation on the transaction. Under the principles of British law and decisions of the High Court it is regarded as an accretion of capital, and not as income. If the words " profit-making undertaking or scheme" are qualified by the earlier words of the paragraph, no objection can be taken to them, but, in the everyday parlance of the people, the man who sells land for more than he has paid for it has made a profit.

Senator Rae - How can any distinction be drawn ?

Senator McLACHLAN - The distinction has been drawn in a multitude of decisions. There has never been any attempt under British law or our own principles of taxation to tax an accretion of capital brought about in the way I have indicated. If assessments are not to be re-opened, provision can be made in section 25 to protect the taxpayer against any injustice, and I see no other point to which I can take particular exception.

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