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Wednesday, 6 August 1930

Senator E B JOHNSTON (Western Australia) . - I move -

That sub-paragra ph (iii), paragraphf (d), be left out with a view to insert in lieu thereof the following: -

(iii)   Any lease of any tenure whatsoever from the Commonwealth or a State of land to be used for pastoral, grazing, or cultivation purposes, which lease has been held by the taxpayer for a period of more than three years prior to its sale.

Apparently, the Government's intention is to exempt from taxation any lease, being a perpetual lease without revaluation, or a lease with a right of purchase. We may assume, therefore, that the Government wishes to give some relief to persons who hold perpetual leases from the Crown. As far as I know the number of perpetual leases without revaluation is infinitesimal. If it is the intention of the Government to exempt pastoral leases, the proviso in the bill does not- achieve that purpose, because in Western Australia, and, I understand, most of the other States also, there are practically no perpetual leases without re-valuation. In most instances the State has a right to re-value at certain stated periods. In Western Australia there are no rightofpurchase leases. There are, however, conditionalpurchase leases, under which the lessee pays instalments for a period of about 20 years, at the end of which period he obtains the freehold. It would be interesting to learn from the Minister where are the leases that are covered by the Government's proposal. Leases from the Crown of land used for agricultural, pastoral, or grazing purposes, should not be taxed if they have been held for a period of three years or more. In most of the States there are large areas of unoccupied waste Crown lands. People should be encouraged to take up these areas and improve them. Exemption from taxation might be one form of encouragement. Our aim should be to increase our export trade in primary products. To do this we should encourage the occupation of all land suitable for agricultural, pastoral or grazing purposes. I agree that safeguards should be included in our taxation legislation against speculators, so my amendment provides that the lease must be held by the owner for threeyears. This condition will be a guarantee of the bona fides of the lessee, who, in the first year of his lease, will bc obliged to incur certain expenditure for stocking the land. A large area in Western Australia, extending practically from a little north of Geraldton to near Wyndham and the gold-fields as well, is held under pastoral leases, which expire in 1948. These leases contain a Condition which gives the Crown the right to re-value at stated periods.

Senator Rae - That country is held on very low rentals.

Senator E B JOHNSTON - The rental is from 10s. to 25s. per 1,000 acres. About three or four years ago the charge was considerably increased by the Pastoral Assessment Board.

Unfortunately, the prospects of the pastoral industry in Western Australia are not favorable. A few days ago it was reported in one of the Sydney newspapers that 60,000 sheep in one district would have to be destroyed owing to the shortage of feed and the high cost of transport to agistment areas. The posi tion of the industry is such that the holders of Crown leases will not be able to bear any fresh taxation burdens. I hope that the Minister will accept my amendment, which will give some relief to those engaged in the agricultural and pastoral industries.

SenatorDALY (South Australia - VicePresident of the Executive Council) [4.15]. - I invite the committee to study this amendment in relation to the clause in which the proviso appears, and to determine whether, if adopted, it would not produce an absolute absurdity. The proviso is inserted to exempt leases which so closely resemble freehold property, that it is difficult to make a distinction. This is an income tax assessment bill under which a clear line of demarcation between capital and income has to be drawn. This particular class of pastoral lease is granted in every State, with the exception of Western Australia. It is the only class of lease resembling freehold; but the honorable senator suggests that another form of lease should also be included. If this amendment were accepted, the position would be chaotic, seeing that throughout the bill a clear distinction is made between freehold and leasehold land. It is provided that certain moneys represent an accretion of capital, and that other moneys represent income. Under the proviso, a legitimate exemption is made. In effect, the amendment provides that this particular class of leasehold shall, for the purposes of this measure be deemed to be freehold land. The proviso has been inserted as a result of a number of cases heard before the High Court, and because of the existence of a class of lease which so closely resembles freehold land, that under the law such cases can be treated as freehold. It is unreasonable to ask the National Parliament to declare that every form of leasehold shall be deemed to be freehold.

Senator E B Johnston - A similar amendment was moved in another place.

Senator DALY - I admit that, and that amendment was no doubt submitted with the best of intentions. Throughout the bill we are attempting to draw a distinction between capital and income, and for the purposes of this measure to bring within the definition of freehold a form of leasehold, which in reality so closely resembles freehold that it is difficult to make a distinction. A number of other leases are granted, such as the lease of an hotel, but which by no stretch of imagination can be regarded as freehold

It will simply mean that if the amendment is carried other clauses in the hill will. have to be reconsidered and the whole measure re-cast. By adopting the amendment we would be declaring that all forms of leasehold should, for the purposes of income taxation, be deemed to be freehold. I shudder to think what would happen if the High Court endeavoured to interpret the intention of Parliament, if such an amendment were adopted. To accede to the honorable senator's request would be to make it even more difficult to get out of that Serbonian bog to which Senator McLachlan referred. I

Urge the honorable senator not to press his amendment, and I trust that the committee will treat this particular clause seriously. This is an innovation in legal and parliamentary practice, and a proposal which should not be lightly considered by the legislature. This clause has been inserted in view of certain judicial decisions by the High Court on various sections of our income taxation law, and if the principle is departed from it will mean upsetting a well-established practice.

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