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Wednesday, 11 October 1972
Page: 1460

Senator LAWRIE (QUEENSLAND) - 1 understand that the Gift Duty Bill and the Gift Duty Assessment Bill are being debated together with the Estate Duty Assessment Bill, ls that the position?

Senator Cotton - Yes, that is the position.

Senator LAWRIE (QUEENSLAND) - I support the 3 Bills. The Estate Duty Bill marks a big step forward by the Commonwealth Government. As a result of this measure the income from Federal death duties will be reduced by about 25 per cent, although the reduced rate of duty will not apply to all estates. Instead of receiving $72m in revenue in death duties, which is the amount received in the last financial year, the Government will receive an amount about 25 per cent less than that. That is the big leap forward. It will be of great help and provide a significant breakthrough for those who support the total abolition of death duties throughout Australia.

The exemption in relation to gift duty is to be lifted from $4,000 to $10,000. That also will be a big help and will mean that every 18 months or so it will be possible to make a gift of $10,000 without attracting Federal gift duty, although the gifts would attract State gift duty. This provi sion will greatly assist in reducing the death duties that would be payable eventually. lt is interesting to note that if the Australian Country Party's policy for the total abolition of death duty is carried out, the need for gift duty will vanish, or very nearly vanish. So by eliminating death duties completely we remove the need for gift duties. Some States still levy a State gift duty. I understand that State gift duty is not payable in New South Wales whereas it is payable in Queensland. In this respect there is some inequality between the States.

I am the Chairman of the Standing Committee on Finance and Government Operations which is charged with an inquiry into all aspects of estate duty and gift duty. I understand that because we have a daily Hansard report of proceedings of the Committee I am at liberty to quote from the public evidence received by the Committee in the course of its inquiry. I have been informed that by having a published Hansard report of our proceedings we are regarded automatically as reporting to the Senate. Naturally I cannot anticipate the final report of the Committee, as its inquiry relates to a very wide range of problems. One problem with which we have been confronted is the valuation of estates. Under the law as it stands today - 1 do not think we can alter it very much - the valuation must be made at. the date of death. In some American States the executors of or beneficiaries under a will may elect any date within 12 months for valuation purposes, but valuation at the date of death seems to be the only fair method. Nevertheless it does create some problems, because assets are frozen until death duties are paid and it becomes very difficult for executors to realise on the assets. The Committee has had mentioned to it the case of people who own a considerable value in shares. If a man who had invested heavily in shares died at the height of a share boom and it was perhaps 6 months before the executors had settled the affairs of the estate, the shares could in the meantime have dropped to about one-quarter of the previous value. This would create a great many complications. I understand that in some cases people have been unable to pay the duty and the estate has been bankrupt for the reason I have just mentioned.

One of the problems associated with death duties as they are levied at present is the freezing of assets. Another trouble is the effect on some sectors of the community as compared with others. I should like to refer to the rural sector, in which people must have most of their capital tied up in property. In most cases practically all their capital is tied up in property and they are unable to dispose of it if they want their property to remain viable. Once half the property, or even portion of it, has been sold, the property ceases to be a viable enterprise. This is one of the great problems that gift duties create for the rural sector. Although people in the rural sector represent about 6 per cent of the population and pay about 6 per cent of the income tax, they pay between 40 per cent and 50 per cent of the death duties. These figures relate to the Australia-wide position.

Senator Cotton - These are interesting figures.

Senator LAWRIE (QUEENSLAND) - Very interesting, Mr Minister.

Senator Milliner - Where did the figures come from?

Senator LAWRIE (QUEENSLAND) - They are available in some of the evidence presented to the Committee.

Senator Mulvihill - Could those figures be incorporated in Hansard? Are they set out in a table?

Senator LAWRIE (QUEENSLAND) - I propose to mention those 3 figures only and they will be incorporated in Hansard automatically.

Senator Milliner - What authority have you for those figures?

Senator LAWRIE (QUEENSLAND) - I forget who gave the evidence, but I am sure that the figures appear somewhere in the Hansard report of our proceedings. I have mentioned how the estate duty applies to the rural sector. I propose now to refer to other sectors of the community and to mention first the professional man. We have been told that whatever he might have paid towards obtaining the degree or qualifications needed by him to practise his profession, the country still pays a considerable amount towards his training. I am surprised at how much it costs the country, through scholarships and educational assistance, to enable a man to possess professional qualifications. Because of those qualifications he is able to earn a good income, but when he dies the qualifications die with him and the Commonwealth receives no return in duty for its outlay in training him. The only duty -payable is on his savings. I invite honourable senators to compare the situation of that man with the position of someone in the rural sector.

I refer next to business of various kinds, most of which normally have some liquid funds. Usually people in business are able to disperse those funds whereas, as I have explained already, once a rural property is broken up beyond a certain point it ceases to be viable and to provide a living area. That generates all sorts of problems. It is easier for people in the non-rural sectors of the community to minimise the effect of duties, and action to achieve this is taken throughout most parts of the country. We are trying to find out the actual extent of this. There are many methods by which duties may be minimised. One method is the formation of companies or partnerships. Different methods which have so far proved to be legal have been mentioned to us. The Bray case shows that one cun give a loan, without interest, repayable on demand; the Gorton case revealed methods which are still legal and still availed of. And there are many other ways to minimise death duty which can be ascertained on good legal and accountancy advice.

The policy of the Country Party is for total abolition of death duties. The federal revenue from such duties is a little over 1 per cent of total revenue representing a little over S70m of a total revenue of about S8,000m. The States get a much bigger percentage of their revenue from death duties. It is about 15 per cent or 16 per cent in most States. Many States have already made reductions in death duties. I do not think they would agree at present to a total abolition of death duties but they may agree to a progressive abolition. There are some people who fear that if the Commonwealth vacated the field completely the States would pick up the tab, but I do not think that is likely because they would have to compete with each other and I am sure that the more attractive States would get the business. Then we have the position of the Australian Capital Territory. What will happen there if the Commonwealth vacates the field? The duties in the Australian Capital Territory are Commonwealth duties only - no State duties are involved - so people in the Australian Capital Territory would have a definite advantage.

An unusual situation exists in the Northern Territory. The Committee has discovered after a lot of researching that the application of death duties in the Northern Territory operates under an Act - it has been a bit difficult to get hold of this Act passed by the Parliament of South Australia - and assented to on 25th October 1893. That Act is still in force in the Northern Territory. In the Northern Territory the application of duty starts on estates valued at £500 and that on estates of between £500 and £700 left to lineal descendants there is a duty of H per cent. In relation to estates left to strangers in blood there is no exemption. On estates under £200 the rate is 1 per cent. The maximum rate in each category is 10 per cent at the £200,000 level. I understand from inquiries 1 have made in one of the Estimates Committees that an amount of $79,000 was collected in death duties in the Northern Territory in the last financial year. It is interesting to note that the Attorney-General's Department is charged not only with the collection of death duties in the Northern Territory but also with the assessment of estates. Commonwealth duties are not uniform throughout Australia and the Territories when we have situations of that nature.

I have had letters from all over Australia on this matter. They have come from the city and the country and all have appealed for total abolition. The general feeling of the people concerned is that the breadwinner has paid taxes all his life and has not been able to accumulate a huge fortune or build up a massive estate because of taxation. Taxation looks after that or is supposed to look after it. But he is taxed again when he dies and this burden falls heavily on the beneficiaries, those people whom he has worked for and tried to help and provide for in later life, to save them from being a charge on the State and having to get a pension. I have had letters of this nature from all over Australia. There have been several cases of widows having to get a social service pension while the estate is being finalised. When the estate is made available, the duty is paid and the assets cease to be frozen there is enough money to provide an adequate living for the widow and family in many cases. But in the meantime what have they to do? They have to eat and live and consequently there have been many instances where these people have had to get help from the Department of Social Services.

We have had cases in the rural sector and in the cities where estates through a fall in wool prices or prices in the cities have become hopelessly bankrupt through the application of death duties. The people involved would have been able to carry on but for the death duties. The Committee in receiving evidence has heard a lot of such cases. It has come to believe from the facts it has gathered that a new thinking on death duties is evolving right throughout the world. It is no longer necessary to break up big estates which is why the system began in the States prior to federation. Federally it was started during World War I to raise money to help pay for the war and it is interesting to read Hansard of that time. Some Ministers and the Government then said that it would help to break up big estates but there are not too many big estates of that nature around the country now. There are not too many people who can accumulate that sort of estate in a lifetime. So it has become a revenue tax and a form of double lax in many cases on the beneficiaries, widows and children who are least able to afford it. The larger estates in many cases are using the tax avoidance schemes I have mentioned. Therefore death duties in their present form are not fulfilling their purpose of stopping the accumulation of wealth, as has been stated on many occasions. The bigger estates are able to afford lawyers and accountants to obtain advice on how to practice tax and death duty avoidance legally.

The new thinking has been applied in the United Kingdom where considerable concessions have been granted, even greater concessions than we have granted here. In many parts of the United States of America the same thing has happened. This Government is to be commended on the start it has made. I hope it will be only a start and that we will go on to provide further exemptions and further concessions until the duty is totally eliminated. 1 hope that we will be able to assist businesses, especially in the rural sector, to achieve greater prosperity rather than be wrecked several times in a short period because of a succession of deaths. One Opposition senator said that there was a provision for such cases, but that provision applies only in respect to a 3 or 5-year period. It is a help if 2 people die in the one year but it is not much help after that because one has to pay estate duty again. This does not help the stability of our country or our cities particularly in respect of the appreciation in the values of homes in our bigger cities. Until this concession was made by the Commonwealth Government many people who were never involved before and who never dreamed that they would be, came within the ambit of the death duty provisions. They are still liable for the estate duties in States which have not provided the exemptions or reduced their taxes as the Commonwealth has done. I commend these Bills and hope that they have a speedy passage and that they will be the start of many more exemptions until we get complete abolition of death duties.

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