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Thursday, 6 October 1983
Page: 1503


Mr SPENDER(9.20) —The rot certainly is home grown. We have just heard from it. It will not be my intention to talk about the Queensland Government, but it is perfectly false and outrageous for an honourable member to say in this House that any government in this country, in any State, at any time and of any political persuasion is, as he would put it, fascist. That is an abuse of his position and is no more than part of his persistent attack on a person whom politically he does not like. All of us in this House have differences of opinion about people, but there is a level of abuse to which people should not descend, and the honourable member has most certainly transgressed it.

I turn to something else; that is, the unintended consequence of the Taxation ( Unpaid Company Tax) Assessment Act 1982. This Act was passed by the previous Government, and its operation was intended to be triggered by fraud. It was designed to recoup unpaid company tax from those who knowingly or unknowingly had benefited from an avoidance or evasion transaction involving fraud, regardless of whether or not they had participated in or even knew of the fraudulent activities. The facts which I now recount I have not been able to verify, but I have spoken to the adviser to the person concerned and I understand the facts which I now set out to be correct.

The shareholder in question is an electrician. He is a shareholder in Alpex Commodity Traders Ltd, a small company which was listed on the Sydney Stock Exchange. That company is now in liquidation. The shareholder, an electrician, not a sophisticated bottom of the harbour dealer, purchased shares in this company on that exchange, and he did so after reading a broker's recommendation. He has received one dividend only, in 1979. That dividend was included in his tax return, and he paid tax on it. Subsequent to that dividend, he purchased further shares, approximately 40 per cent of his total holding, at a price of 43c per share. That brought him to the position of being one of the largest shareholders of some 380 shareholders in this small company. I understand that his total investment was around $10,000. He has received no dividend on these further shares, and they are, of course, all worthless.

Unknown to the shareholder, who neither knew nor had spoken to the directors of Alpex or any of its subsidiaries, in the 1980 financial year Alpex arranged for the sale, by a subsidiary of another subsidiary of Alpex, of shares in that company-the company whose shares were sold was called T. C. Moritz Pty Ltd-and a capital profit of $427,666 was obtained. No benefit was received or is receivable by the shareholder on that transaction. On return from his annual holidays on 12 September 1983, he found in his post box a letter from the Deputy Commissioner of Taxation, Sydney, together with three notices of assessment on T . C. Moritz Pty Ltd. This was the first indication that he had that he was one of those people described as bottom of the harbour crooks, because the Deputy Commissioner's letter advised him that he was up for a contingent liability. I will refer to some of the paragraphs of that letter. The Deputy Commissioner said in paragraph 3 of his letter:

Under the provisions of the above Act-

that is, the Taxation (Unpaid Company Tax) Assessment Act-

Alpex Commodity Traders Pty Ltd would, had it not been divested of assets, have been liable for the payment of recoupment tax . . . The amount subject to recoupment tax being calculated on the basis of the proportion of the total consideration received for the sale of the shares.

That is in accordance with the law. He went on:

. . . in those circumstances where a vendor shareholder that is a company or trust is unable to pay its recoupment tax liability, the legislation allows for that recoupment tax liability to be passed on to those persons or entities who receive or were entitled to receive-

not who did receive-

any capital distribution from that company or trust.

So he learned that he was in that category of persons. He was told that this was a preliminary step towards raising a recoupment tax assessment. He was advised of his objection rights and, in respect of payment of outstanding company tax, he was told:

Any recoupment tax assessments subsequently raised-

that is, against the shareholder-

will, however, be based only on the unpaid ordinary company and undistributed profit tax amounting to $243,877.86 together with any additional tax that will be imposed . . .

I am leaving out certain words which are not relevant. He went on:

The fact that an objection has been lodged-

as apparently is the case-

against the company assessment means that an arrangement cannot be entered into to pay the amount of $243,877.86 by instalments free of additional tax for late payment. However, it is possible to arrange to pay, within 30 days of the service of this copy of the assessment notice, the amount of $243,877.86 and thus eliminate the accrual of additional tax for late payment.

Is it not a little rich for a shareholder in a public company to be told that if it is all arranged-that is, the entire liability of $243,000-then he need not worry, in effect? He is in this position: He is an electrician. He is not a rich man, as I understand matters, and he has been advised thus far at no cost to him . He cannot afford to fight. He may be liable for recoupment tax, notwithstanding that he has received nothing and there was no wrongdoing. Despite his ignorance of the affairs of the company whose shares were sold and of commercial and tax matters, he has been selected as one of he five persons appropriate to represent some 280 or so Alpex shareholders because he was one of the largest shareholders in this rather small listed company. I am told that his solicitors have been advised that one of the other five has left the country with no intention of returning.

What are some of the crowning ironies of this situation? The shareholder visited the Australian Taxation Office and he was informed by officers of that Office that it could be some years before a recoupment assessment could be issued against him, if at all, as there was an unfinalised objection lodged on the company's behalf. If or when the assessment is issued he will be liable for somewhere between $2,100 and $2,200 plus 20 per cent of that amount from about 15 September 1983, but he may prevent this penalty running by arranging payment under section 20 of the Taxation (Unpaid Company Tax) Assessment Act of-listen to it-$243,877 on behalf of the company whose shares were sold or by arranging payment of his share of the contingent possible eventual vendor's recoupment tax , for which, of course, he may never be assessed.

Only yesterday, I understand, he learned that his liability might be twice that which he imagined or thought it could be because apparently another subsidiary of the public listed company in which he owned shares was sold. As a consequence , as I say, he could be up for twice the amount that he thought or was advised he could be up for, namely, $2,100 or $2,200 plus 20 per cent penalty tax from 15 September 1983. I would not think there is any member of this House who, on the basis of those facts, which I understand to be correct, would not agree that that is a perfectly unjust and unintended operation of the Act. I am sure that the previous Treasurer would have been anxious to eliminate that kind of effect. I hope that the present Treasurer (Mr Keating) will give his attention to it, because he and this Government are in the position to eliminate that kind of injustice from a statute. It is a sad case and it shows the great danger of passing the more far-reaching legislation presently before the Senate. Of course , when one gets into legislation of this kind, one sometimes simply does not understand how far the net will spread and whom it will affect. On the basis of those facts, it is perfectly unjust that this man, an ordinary Australian citizen, should be caught up in the toils of recoupment tax.