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Tuesday, 2 November 1971
Page: 2843

Mr COLLARD (Kalgoorlie) - Under the Income Tax Assessment Act as it operates at the present time the maximum deduction allowed to a taxpayer in relation to education expenses is $300 for each dependent full time student under 21 years of age. The amendments now proposed to that Act would increase the maximum permissible amount to $400 and would also extend the age limit to those dependent children of a taxpayer who are students of less than 25 years of age. Neither amendment will be the means of offering any real assistance in meeting the actual high cost of education, and even where there may be some simple or slight benefit it will be directed towards the more wealthy taxpayers while the very people who do require some significant assistance towards the education of their children will gain very little if any help or relief.

The amount of $300 as a maximum deduction from actual income was set down in 1963 and, as everyone knows - and many of them to their sorrow and to the depletion of their savings - during the years since 1963 there have been very substantial increases in the cost of education itself and also in the cost of transport and accommodation, etc., for those children who are obliged to travel to and remain in either capital cities or large country towns to obtain an education. Those latter costs are very substantial indeed, and it is quite unjust and shows a complete lack of sympathy and understanding, or perhaps lack of concern by the Government, that a taxpayer in the far north, for instance, is allowed no more for education expenses as a taxation deduction that is a taxpayer living in a capital city who is not subject in any way to costs of fares and whose children are able to live at home during the whole time they are gaining their education.

The fact is that while education expenses under the Act include those for uniforms, fares, fees, books, etc., the fares alone with regard to children travelling long distances and who go home during the year - surely they are entitled to do that - would be very close to the allowable maximum deduction. Therefore it could correctly be said that the taxpayer in those circumstances exhausts his entire entitlement on fares and is unable to claim on the several other items which a taxpayer in the city successfully can include. For instance, the air fare from Perth to Kununurra or Wyndham is approximately $240 return and from Perth to Derby is approximately $200 return and so it goes on down the coast. So even if the child went home only once during the school year it would mean that at least half the maximum amount would be used up on fares. In giving consideration to these amendments it must be borne in mind also that like every other form of concessional deduction such as for spouse, medical costs, children, etc., the amount of deduction is not a direct deduction from taxation itself but simply a reduction in actual income for the purpose of arriving at the income upon which tax will be imposed. As a result of such a method a taxpayer on a low income obtains very little benefit and in some cases none at all, while on the other hand a taxpayer on a very high income may obtain a very considerable benefit, reaching as much as two-thirds of the amount of his actual expenditure. In other words, this means that the taxpayer who needs the greatest relief or assistance receives little if anything, while the taxpayer in exceptionally good circumstances and who could really well afford to forgo any tax concession is the only one who reaps any real benefit.

For those reasons I am not at all happy with the present method of offering family assistance or concession and am of the opinion that a straight forward allowance of direct taxation deduction irrespective of income would be a much more equitable and acceptable system, but even this would not help those people who, because of their circumstances, pay next to nothing in tax in any case and yet who at the same time are the very people who require assistance for the education of their children or to ensure their good health.

Because of these inequities and discriminations within the present system there is an urgent need for a review of the whole taxation set-up to ensure that those in the greatest need receive the greatest assistance or relief. But if the Government intends to retain this present system, and there is no indication that it does not, surely with regard to education expenses alone it would be a much fairer and proper method to have at least 2 areas of allowance or even perhaps 3 areas to meet the different items of costs involved. The first allowance could take care of the normal expenses which every parent is obliged to meet. I refer to the cost of books, uniforms and that sort of thing. The second area, if only 2 areas are to be adopted, would be for fares and accommodation, or if there were 3 areas fares and accommodation could be separated.

I imagine that having just 2 areas would be sufficient to meet the situation and would certainly at the least remove much of the unequal application and effects which we have under the present system, where fares and accommodation, as I said earlier, can well and truly exhaust the maximum deductions permissible at present. Admittedly the proposed increase of $100 for education expenses can mean a slight reduction in tax for some parents in distant places who can afford to send their children south or elsewhere to school and who will be able to claim that $100 against air fares, but it will not be such as to mean the difference between a parent being able to afford to send his children away for that better education.

This brings me to the point that if the system is to be retained and if $400 is now considered to be a fair and appropriate figure to meet education costs in areas where the bulk of taxpayers reside - I refer of course to the capital cities - certainly an amount much higher than $400 should be allowed to taxpayers who live in remote and distant areas and who can do nothing other than pay very large amounts for both fares and accommodation costs if they wish to give their children the opportunity of gaining a good schooling. It is for that reason that I suggest the necessity of a second area or section of education expenses being struck.

This would not in any way prevent city dwellers lodging their claims against bus fares, nor would it prevent those living not so far distant from claiming for train fares. They would still have that right even though it would mean a separate claim item. But in addition people in far away places, who are a very important section of our community, would have a right not only to claim on the high cost of fares and accommodation but also to claim in relation to costs of uniforms, books, fees and so on in a like manner to those who have no need to consider fares, etc., and who therefore, if their circumstances permit it, are able to expend the maximum permissible amount on books and fees and so on in the knowledge that the whole of that amount can be reflected in their taxation returns.

As I said earlier, I do not like this present system but if it is to be retained then the least we can do is to make such alterations as are necessary to give all taxpayers an equal claim measured against necessary expenses which include fares and accommodation. The same corrective measures should be taken in relation to medical and hospital expenses which at present exclude the cost of transport which is often necessary to allow a sick person to obtain medical or hospital treatment. A completely ridiculous situation applies and is retained by this Government at the present time, whereby a taxpayer may claim as a deduction against his income the actual cost of any doctor or hospitalisation for a dependant but is denied entirely any claim against the costs he incurs, which are quite often very substantial, to bring or send that dependant to a place where the treatment is available. The situation is similar to that which applies with regard to education expenses. The taxpayer who is resident close by a doctor or hospital has a very distinct advantage over the taxpayer who, because of distance and lack of medical facilities, is obliged to travel or to meet travel costs to allow his dependent wife or children to consult a doctor or to enter a hospital.

Referring again to my opposition to this present method of determining tax allowances in respect of dependants and certain expenses incurred by a taxpayer, I want to explore that situation just a little more to illustrate how inequitable the system is and to show how it operates to favour the rich and do nothing at all for those in less fortunate circumstances. The fact that deductions apply to actual incomes and not to the tax itself means, for instance, that this proposed SI CO addition to the education allowance will give to a taxpayer with one child attending school and on an otherwise taxable income of $1,500 - that is, of course, if he can afford to spend $400 on the education of his child - an actual tax reduction of approximately $16 while another taxpayer with a taxable income of $15,000 and with one child at school could gain a tax saving of approximately $58 - $16 in one case and $58 in the other. This could be a fact even though both taxpayers live in the same street and meet exactly the same education expenses for children attending the same school. This is a completely ridiculous situation, particularly when it is quite obvious that the taxpayer with the taxable income of 31,500 is finding the education expenses are a much greater burden than does the taxpayer on the income of $15,000. Of course when there are 2 children in each family, or 3 or 4, then the man with a higher income gets an even greater advantage.

As a matter of fact it is obvious from taxation statistics that the great bulk of the taxpayers obtain very little real help from the existing allowance of $300, and those same taxpayers will receive no benefit at all from any increase whether it be $100 or $1,000, for the very simple reason that the low income earner cannot afford to pay out $6 or $8 a week for the education of a child, or twice or three times that amount if he has 2 or 3 children. This is a very big problem in distant areas, this cost of giving the children a good education. This is why one so very often hears parents say that they will not be able to stay much longer in the far away places as much as they would like to do so. Certainly the very small amount of tax relief which comes from the existing system of education allowance will do exactly nothing to overcome the problem, and this proposal of an additional $100 will make very little difference even to those taxpayers on incomes of $6,000. There are some 4! million to 4i million taxpayers with incomes of less than that amount, while taxpayers with incomes above $6,000 total only approximately 660,000, which proves, as I said earlier, that the great bulk of the taxpayers will gain very little from the additional $100 and that where any benefit is gained it will go largely to those who actually do not require it and in fact are well situated to meet the cost of their children's education.

Actually it does not matter whether the taxpayer be a low income earner or a high income earner, because the effect of the Government's somersault decision to increase income tax this year by 2i per cent will very largely deplete any benefit or tax relief which may have otherwise flowed from the $100 added to the existing amount of allowable deduction for education expenses. Honourable members will recall, and the taxpayers outside are not likely to forget, that just prior to the last election at the end of 1969 the then Prime Minister promised the people that if his Government was re-elected it would bring about reductions in income tax, but now we have this Bill before us which will have an opposite effect and will increase the amount of individual tax paid last year by 2i per cent. This will mean, of course, that those taxpayers with school age children and who cannot afford to pay even $300 - the existing allowable deduction for education expenses - will be even worse off this year than they were last year because of the additional direct tax they will be obliged to pay. We on this side of the House intend to oppose that proposition.

Taxation statistics show some rather interesting figures in relation to the average amounts which taxpayers with different incomes claim as education expenses. For instance, that group of taxpayers whose incomes ranged from $417 to $1,599 in 1968-69 claimed an average amount of approximately $57 a child for some 64,500 children of over one million taxpayers. It is quite clear from those figures that those taxpayers and those children will derive no benefit at all from this increase of $100, and they would in most instances be stretching the purse even to reach the $57. Also, of course, it is most unlikely that any taxpayer in that group could afford to keep at school a lad or girl of 21 years of age, let alone 25, and so no benefit can flow to that group by the extension of the age limit. Then we have the group whose incomes range from $2,400 to $2,599, a group comprising approximately 252,000 taxpayers and 89,000-odd children with an average claim of $75. So here again is a group which is unlikely to gain any benefit.

Let us go to the group whose incomes range from $5,000 to $5,999. This group comprises 282,500 taxpayers and 293,000 children with an average claim of $96 for each child. Very few in that group would be likely to exceed the existing $300 and so are unlikely to gain any relief from the extra amount. As I pointed out earlier, by the time you reach the group whose incomes become as high as $6,000 something like 80 per cent of the total number of taxpayers have been included and only a small percentage of that number would reach the existing maximum claim for $300 for education expenses. This is where the system or method is so wrong. There are something like 320,000 taxpayers in the income group up to $6,000 who have 3 or more children and it is quite obvious that those taxpayers, except in a few instances, would find it very difficult and in fact impossible to pay out more than perhaps $50 or $60 towards each of their children's education. Therefore the children's education suffers and the best this Government can do is to increase the concessional deduction which does absolutely nothing for these taxpayers.

This system which the Government follows so slavishly can give one taxpayer a tax reduction of $205 for a spouse while another taxpayer will receive only $30 or even less. The first taxpayer can receive $137 tax relief for a child and the second taxpayer only $15. Surely there can be no justification for such different treatment. In fact if there should be a difference it should be in the reverse direction because there can be no doubt that the second taxpayer, the one on a fairly low income, requires a much greater relief than a person whose taxable income is over $30,000 a year. But this Government is either concerned only with the rich or too lazy to have a proper review of the Taxation Act, and the only way that those people other than the wealthy can win is to ensure that they elect a Labor government at the next election.

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