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Thursday, 22 November 1973
Page: 3756


Mr BERINSON (Perth) - The Income Tax Assessment Bill (No. 5) embodies at least 20 and, I suspect, perhaps as many as 30 separate amendments to the Income Tax Assessment Act. Its complexity might be seen in another way if we look at the sheer volume of paper work to which it has given rise. The second reading speech of the Treasurer (Mr Crean) occupied about 5 pages of Hansard, the Bill takes 29 pages of print and the explanatory memorandum takes another 67 pages. In short, the Bill strikes me as being the sort of measure which will be an absolute delight to the accountancy profession and daunting to everyone else - and that certainly includes me. In fact, recognising my own limitations in this field, I intend as did the honourable member for Bradfield (Mr Turner) to restrict myself to dealing with only one and an admittedly minor provision in this Bill. I refer to the proposal to abolish tax deductibility for war memorial donations.

Before I do that, however, I think that I should not be so discourteous to the Deputy Leader of the Opposition (Mr Lynch), who led with unlimited time for the Opposition, as to ignore completely what he said. The Deputy Leader of the Opposition, faced with a Bill which, as I have already said, includes as many as 30 amendments to the Act might have been expected in the time at his disposal to find at least one amendment with which he could agree, at least in a modified or qualified way. But he could not find even one such provision. He faced this enormous new Act with an unqualified, a uniform and quite impartial condemnation. Absolutely everything in it was rotten, including measures per,fectly in line with measures adopted by the previous Liberal Government, or at least analagous to them.

I will give just one or two examples and I do not want to use any more time for this purpose than necessary. Look at the Deputy

Leader of the Opposition's very first criticism of the Bill. He referred us to clause 6 which will impose taxes on pensions. To use his words, this was perhaps 'the most iniquitous clause of all* - a terrible provision. It was going to introduce the principle of taxability to the pension system. In order to put it in its worst possible light, the Deputy Leader of the Opposition pointed out that this dreadful measure was going to result in fully 20 per cent of the pensioner population being taxed. I would have thought that if the Deputy Leader of the Opposition was interested in some sort of rational discussion of this question, he might have acknowledged at least this much, that, while it is true that 20 per cent will be taxed, that obviously and conversely means, as the Treasurer has pointed out, that 80 per cent of pensioners will not be taxed. That is, they will not be taxed at all, or even be required to submit a taxation return. Of the remaining 20 per cent, a goodly number will pay no more tax than they already pay and, of the small number still left after that - I am referring to single pensioners - those earning up to $75 a week will pay less than younger members of the community earning a similar amount and those earning over $75 a week will certainly pay no more. I think that the Deputy Leader of the Opposition might have acknowledged at least that much.

I think that he could have acknowledged something else, namely, that whereas antiLabor governments have been talking about the abolition of the means test for over 60 years, it is only the Labor Government which has actually moved to bring the abolition into effect. From the very first day that we undertook the commitment to abolish the means test, we made it perfectly clear that that measure would have to be accompanied, for reasons of both equity and economy, by the introduction of taxation liability on pension payments. As if that were not enough, the truth is that the principle of taxation liability on pensions free of means test is a principle which previously and consistently has been accepted by the Liberal and Country Parties themselves.


Mr Cohen - They forget that


Mr BERINSON - I wish they would remember it. Earlier this year when we were talking about one of the social service Bills and when the discussion of the taxability of pensions was under way in the House, I remember interjecting on the honourable member for Mackellar (Mr Wentworth). I remember the occasion so well, Mr Speaker, because as you know I interject rarely.


Mr Adermann - That is right.


Mr BERINSON - Yes that is true, but I did interject at that point to ask: 'Is it not a fact that Liberal-Country Party proposals for abolition of the means test are and always have been accompanied by the proposal that those pensions would be taxed?' The honourable member for Mackellar was honest and direct enough to say: 'Yes, that is true'. Of course it is true. It would hardly be possible in equity or under any consideration to introduce the abolition of the means test without that provision. Of course, to be fair in return to the honourable member for Mackellar, he did point out that his Party would not be anxious to abolish the age allowance but in this respect the books are balanced, so to speak, by the special taxation allowance of $156 provided in our own Bill. So, I think that before one gets too indignant, as the Opposition parties are obviously intent on doing in relation to this question of taxability of pensions, one had better remember the background to it and the fact that the proposals of honourable members opposite were always linked with the same or at least a analagous proposal.

I wish that honourable members opposite would remember something else at the same time and that is that at least in our case the taxability provisions are linked with an attitude to pensions which is somewhere approaching respectability. At least in our case and unlike that of honourable members opposite, it is accompanied by an advance commitment to ensure that the pension will reach a proportion of average weekly earnings which has never been reached in this country since the last time we had a Labor government, almost a quarter of a century ago. We are committed to bringing the pension within a reasonable period to 25 per cent of average weekly earnings - something to which honourable members opposite have never committed themselves and still today do not commit themselves.

Again on the question of pensions, honourable members opposite might also remember that we have committed ourselves, in order to reach that target, to increases in the pension of stated minimum amounts only, twice a year. That is to be compared, if you will, with the record of the previous Government which no less than 7 times in its period in office allowed 2 years at a time to pass without any alteration or updating of pension payments. So I put to the House that it is not of much use plucking out this one question, limited as it is, related to taxability of pensions and ignoring the whole framework of the pensions system within which it has to be considered.

I make only one other reference to what the Deputy Leader of the Opposition had to say, and that is in relation to his eloquence and indignation on this other question of the taxability of profits arising from the sale of assets within 12 months of their purchase. He was terribly upset about that and I can understand his concern because it was obviously based on the very special, even peculiar one might say, nature of his electorate. It appears that in the electorate of Flinders we have a place which is literally overrun with 2 broad categories of constituents. The first category involves families who, within a few months of buying a home for themselves in that area, experience unexpected multiple births, and so they have to get a larger house, obviously. The other general category of population in Flinders comprises those people who, again within a very few months of purchasing a home there, become so ill that they have to move to the Gold Coast.

Those were precisely the 2 examples given by the Deputy Leader of the Opposition, and in response to them I say only this: If we are to approach these things on anything near to a reasonable and rational basis we have to keep our feet on the ground much better than that. If the provisions of this Bill are in fact too limited, and if in practice they are shown to react unfairly or inequitably against a number of people they are always open for review and, given the approach of the Treasurer and the Government to these matters, I have not the faintest doubt that they would be reviewed. But I think that in practice we are going to find that these exaggerated examples are, by far, the exception to the rule. They are most unlikely to occur in practice, and surely the Treasurer is being more realistic than the Deputy Leader of the Opposition when he points out that if profits do arise from the sale of property within 12 months of purchase, it is much more reasonable to assume that this has been due to a speculative transaction rather than to one enforced by other considerations.

I move from there hastily back to my original purpose, and that is to discuss the question of the abolition of tax deductibility of donations to war memorial funds. This move obviously came from a recommendation in the so-called Coombs Task Force report and its origin is to be found in item 136 of that report. It goes without saying that since the abolition of this deduction is Government policy and comes within the Budget measures, I do not oppose it. On the other hand, I am not all that enthusiastic about it either since, at least in some respects, I have the suspicion that it goes too far. In particular, I do not share the sense of indignation which comes through so clearly in the language of the Task Force report. Moreover - indeed this is my main reason for raising the matter - item 136 also deals with the other charitable deductions allowed by section 78 (1) (a) of the Income Tax Act. I do want to make the point specifically that I hope that the implied suggestion there that the abolition of deductions should be extended to these areas as well, will not be implemented.

Let me quote some of the comments in the report relating to these matters. For example, it says at one point:

The 'hard core' of the gift provisions relate to areas in which, at the time of their introduction, governmental activity was heavily supplemented and complemented by private activity.

To which I would add - and still are. Again the report says:

Some provisions have been widely abused: as gifts for war memorials are deductible, there has been a rash of 'memorial' swimming pools, private school gymnasiums, churches, chapels, and so on.

This comment can only be understood as a criticism of the organisations sponsoring war memorial projects, and I believe that any such criticism is unfair and misdirected.


Dr Forbes - And from a man who did well out of the war, by not going to the war. It could be understood by that.


Mr BERINSON - It is, of course absurd that 28 years after the war we should still be sponsoring new war memorial projects, and I am sure I have the approval of the honourable member for Barker (Dr Forbes) for that But if there is any fault to be ascribed from that, it is the fault of successive governments for failing to review these provisions, and not the fault of organisations who have brought them selves within them. From their point of view, while section 78(1)(a)(vii) has existed, its principles and provisions have been available for adoption. If I understand the position correctly, every war memorial project has also required the approval of the Taxation Office in advance, and when these requirements have been met I see no room for criticism, expressed or implied, to be directed at the organisations concerned.

This, by the way, is without even making reference to the nature of the war memorial projects themselves, all of them necessarily non-profit, and almost all of them providing reasonable and useful facilities as well for a broad cross-section of the community. Given the background of these considerations, I am pleased that the Government, while adopting the proposal to abolish the deductibility, has not adopted the terms used by the Task Force in support of the amendment. I also welcome the fact that the Government has not adopted the sudden death cut-off implied by the report but has allowed a phase out period of 12 months so that donations to existing memorial projects made, before 30 June 1974, will still be deductible. But frankly, given the proviso that no new projects would be granted war memorial status, I believe that an even longer phase out period of 2 or even 3 years would not have been unreasonable. This consideration arises especially in view of current fund raising techniques. I think most honourable members will be aware of how large scale funds of this nature are raised today. Apparently you do not go to a man any more and say: 'Give us a donation' and it is physically handed over. You say: 'Make us a pledge' and it is a pledge to be paid over 4 or 5 years by annual instalments. It is less painless and you apparently get much more.

What happens, though, is that the organisation proceeds immediately to build its project on the basis of its total pledges, and what it uses for colateral is not only the building which is constructed but also the pledges which have been made by intending donors on a bona fide basis. With the abolition now proposed to apply from next June, it is obvious that in the case of at least some projects which are at present under way, either the organisations or the donors, or both, are going to end up severely embarrassed and through no fault or bad faith of their own. It is on that basis that I would be inclined to say that an even longer phase out period would not have been unreasonable.

There is another casualty of this amendment which has not been referred to by the Task Force and which should be at least recognised if only again to illustrate the need for the closest scrutiny of any further such amendments. As will be seen by a reading of section 78(1)(a)(vii) the section now to be discontinued, this not only supports the construction of new war memorials but also the maintenance of existing war memorials.

Whatever may be said about the 'abuse' with respect to war memorials to be established for the first time in 1973, it can hardly apply to memorials which date from earlier years, many of them obviously built in the immediate sorrow and hopes for future peace which followed the First and Second World Wars. I cannot do more than hazard a guess at what it would cost to continue tax deductibility for the maintenance of the memorials already established. I suspect that it would be little. I would have hoped ' that perhaps we could have accommodated that by allowing for tax deductibility of that expenditure.

I cannot conclude without reference to the fact that I hope that at least these drawbacks, even to this reasonable proposition related to war memorials, will serve as a caution to the need for care and consideration of further amendments which might be considered in relation to other charitable purposes. Again referring to item 136 of the report, under the heading 'Possibilities' are listed possibilities which include the partial or total abolition of exemptions of donations to all charitable causes. With due .respect, it appears to me that even the listing of these possibilities indicates a surprising insensitivity by the Task Force to the role which charitable organisations still play in the community as well as to the fact that the value of tax deductibility to their efforts is out of all proportion to the cost to Consolidated Revenue. I regret that time has caught up with me, but I think that the follow-on from these comments will be obvious to honourable members and I hope it is kept in mind.







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