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Thursday, 5 December 1974
Page: 3180

Senator CARRICK (New South Wales) - The Senate, of course, is debating in cognate form 4 Bills. I indicated last night that the Opposition supports two of these Bills- the Income Tax (Bearer Debentures) Bill 1974 and the Income Tax (International Agreements) Bill 1974- and wishes them a speedy passage. In relation to the Estate Duty Assessment Bill, the Opposition has an amendment which has been circulated to honourable senators and which I will move at the end of the second reading debate at the conclusion of my remarks. My main remarks are concerned with the Income Tax Assessment Bill (No. 2) 1974. 1 also foreshadow that the Opposition will move an amendment to the second reading of this Bill.

I remind the Senate that this Bill is a complex Bill covering such matters as increased tax liabilities for the mining industry, the imposition of taxation on fringe benefits, special allowance of deductions for depreciation of child care facilities, reduction of the limit on deduction for education expenses, the deductibility of mortgage interest payments, a reduced level of the special deduction allowable to life assurance companies, a rebate of dependants' allowances for low income families, technical amendments of the principal Act with respect to dividends payable from Papua New Guinea, the relief of taxpayers in cases of hardship and provisional tax for 1974-75.

I said last night that in continuation of the Government's punitive approach to the mining industry, this Bill took some further measures. Clauses 4, 2 1 to 29, 30 to 33, 39 and 45 relate to mining companies. The proposed amendments will provide an estimated $80m additional revenue in a full year and a further once-for-all gain of $50m in 1975-76 in terms of revenue previously forgone. The Bill itself follows upon the Income Tax Assessment Bill 1973. It has been introduced in spite of the fact that the whole subject of taxation of the mining industry is at this moment being reviewed by 2 expert public inquiries. I refer to the Taxation Review Committee and the Industries Assistance Commission. It is quite inconsistent as a Bill with the Government's stated policy that it would not act to introduce or withdraw measures until the Industries Assistance Commission had reported. It also, of course, pre-empts the Asprey committee. Clauses 5 and 27 are designed to withdraw the 20 per cent tax exemption on income from the production of certain prescribed minerals including copper, bauxite, nickel and beach sands. This, of course, is another punitive measure. The Opposition is opposed to this proposal.

At a time when it is imperative that the mining industry, in common with other industries, should be given incentives to produce, to expand and to earn wealth for this country, we have the reverse occurring. We have disincentives. This Government in its blunderbuss fashion raided the overseas reserves of Australia and ran them down before it suddenly panicked. The overseas reserves of this country are vital to us as a great trading nation in order that we can, of course, buy from abroad. One of the ways- a major way- of recouping our trade balances is through the mining industry. This Bill is another disincentive in that regard.

Senator Walsh - What are our overseas reserves?

Senator CARRICK - They were in the order of $4,200m a year ago and rising. They have run down to about $3,000m. If the trend continues, by the middle of next year they will be some $2,000m, which is regarded by all authoritative people as perilous since it would be barely 2 months purchasing power for this nation. It is to be understood that the ability to sustain overseas reserves as a great trading nation is an ability which establishes a stability for Australia in the eyes of the world.

Senator Walsh -Did you say $2,000m would be 2 months purchasing power?

Senator CARRICK - In answer to Senator Walsh, who is particularly garrulous-

Senator LAWRIE (QUEENSLAND) - I rise to order. Is it in order for an honourable senator to interject when he is not in his seat?

The ACTING DEPUTY PRESIDENT (Senator Bonner)- Order! My understanding is that it is not in order to interject at any time but we show a blind eye to it on occasions.

Senator CARRICK -Nobody more than Senator Walsh would need to have educational answers to his questions. In that quite serious vein I proceed and respond. The fact is that I said that it would be dangerous if the level of our reserves ran down to, say, 2 months or even 3 months reserves.

Senator Walsh -And that is $2,000m?

Senator CARRICK - That would be dangerous and it would be in the order of $2,000m. But since the honourable senator continues to interject I say this to him, and he might in fact heed this because it is perhaps the most imperative of the issues confronting the community today: The quadrupling of the oil price by the Middle East countries means that those countries now preempt about $ 120 billion by way of trade reserves from the purchasing nations. The total trade reserves of all the purchasing nations of the world is about $160 billion. The honourable senator who has now retired to hibernation, making a study of this in hibernation, should realise that any country with any sense for its own preservation would want to maintain its trade reserves at the highest level possible.

Having said that, I remind the Senate that clauses 30, 31 and 32 of this Bill change the period over which expenditure incurred on a railway, road, pipeline or other facility for transporting minerals is deductible for taxation purposes over periods ranging from 10 to 20 years. This is another attempt by the Government at intervention in the minerals industry. I move from there to credit unions. Clause 6 of the Bill proposes that interest received by credit unions on loans made to their members be exempted from taxation and it provides qualifications. The Opposition wholly supports this measure.

I move now to the question of the qualifications on fringe benefits. This is a most curious matter. The proposal itself is one of intervention primarily upon what are private vehicles. The Government itself should define private vehicles. I invite the Minister representing the Treasurer, the Minister for Agriculture (Senator Wriedt) in his response to throw some light on this matter. What is meant by this? The provision, of course is that taxpayers who use privately a company car are to be required to declare as income an amount equal to 12 per cent of the car's original price or 24 per cent where the original price exceeds $6,000. This relates, of course, to section 26a of the Principal Act. No doubt some clarification of the existing provision is necessary. The Opposition points out to the Senate and to the public that the proposal as listed in terms of the qualification of fringe benefits could mean to an ordinary person using a vehicle in the course of his duties- using a company car or an organisational vehicle- that his taxable income will be increased by about $400 or $500 a year. How do we define this?

For example, is a person who travels to and from home in a vehicle which might embody some mechanical contrivance- shall we say, a concrete mixer- covered in this way? How shall Ministerial cars be considered? I ask and invite the Minister to respond definitely to this question: Is a Ministerial car which is used to travel between the home and the point of business also to be considered in this way, and is a Minister to have his taxable income increased in this way? What is the definition of a vehicle in this regard? Why is the provision sought to be punitive? Why is it sought to reach out and to hit people who, as part of the ordinary amenities associated with earning their wages or salaries, have the ability to travel to and from their work in this way? Does a carpenter using his vehicle to take his tools of trade to and from his work, have to add into his tax return an amount to cover this, and, if so, what amount? We invite the Minister to clarify that.

As to the provisions regarding child care and the provisions regarding non-resident dependants, the Opposition places no qualification or obstruction on those matters. But when it comes to the decision under clauses 15 and 16 of the Bill to provide that the statutory maximum deduction of $400 allowance for educational expenses be reduced to $ 1 50, the Opposition emphatically opposes that. Not only shall we mention it in our addendum, but the Leader of the Opposition (Mr Snedden) is on public record as saying that upon return to government we will rectify this matter. It is notorious that a substantial section of the Labor Party Caucus itself saw the gross inequity of this measure and sought to rectify it. Only after a plea from the Prime Minister (Mr Whitlam), who put his leadership on the line, was this matter not rectified by the Caucus. It is significant that the Prime Minister put himself to the test in defending a reduction from $400 to $ 1 50. Let us see what this means. It is a common tendency of the Labor Party, of the Whitlam Government, when the Opposition seeks to defend the maintenance of the $400 allowance, to say: 'You are seeking to protect the affluent, you are seeking to protect the wealthy'. This is absolute nonsense. It goes further and says: 'You are seeking to protect the independent schools. You know nothing of the state schools.' That is equal nonsense.

As a person who was educated, and is proud to say so, in state schools, and as a parent who sent his children to state primary schools, I emphatically applaud the work that is done by state school education authorities. Having been an active member of parents and citizens associations, I understand the problems of the parent in ordinary average income families in sending his or her children to state schools. Let us look this one fairly in the eye. Any person who sends his or her children to a state school today will incur expenditure of substantially more than $150 a year in education expenses. To this the Government intervenes and says that it has some abstract statistic, which must be a year or two out of date because all taxation statistics as published are, which shows that the average claim- a mystical figure- is $ 1 50 or less. Let us have this information tabled. If the Minister is going to use this argument let him put forward in the Senate a table on this question, giving us the years, the figures and the facts.

I have inquired of a multitude of parents- and I am an active patron of a public school- as to costs. Why, today if a couple of uniforms, a couple of pairs of shoes and some sports clothes are bought for a child, that purchase in itself exceeds $150. Does the Minister understand the cost of textbooks, the whole of the ramifications of the costs of excursions and tours, and the expenses of buying materials for arts and crafts? Does he seriously say- and this is importantthat in the year 1974, and prospectively next year, the average cost to a parent of state school children will be $ 1 50 or less? Let him stand up and produce the figures on this. Why should we put a limit of $150 on this? What has happened to make this desirable or necessary?

The second leg of this matter, of course, becomes clear. It is notorious that a significant section of the Whitlam Government is out to destroy the independent school system. It is notorious that what that section wants to do is to make that system so expensive that people are priced out of it. It is, of course, as part of that section's class hatred and part of its sectional and sectarian hatred that it does this. It is an ugly and un-Australian thing. The Opposition places profound emphasis on the state school system.

Senator Button - Does that include the Catholic schools- the hatred directed against them?

Senator CARRICK - The question asked by Senator Button was: Was I implying that there was a hatred against the Catholic schools? In my private opinion, some sections of the Labor Party would be out to destroy the Catholic school system.

Senator Button - I am asking you to judge on performance.

Senator CARRICK -Yes, I will come to that shortly. I will judge on performance, because what the Government has provided through the Karmel committee for the parochial schools and for the other schools, now that inflation has destroyed the effect of the report of the Karmel committee, would be less than what had been foreshadowed by the McMahon Government; yes, indeed. Many a principal of a parochial school has told me that the policies of this Government will destroy those schools. It is on record in the Press this morning that a cleric, speaking at a non-government school, said exactly the same thing, that the Government was out to destroy the independent schools. But a fundamental freedom that this Senate is pledged to maintain is freedom of choice- the right to choose a state school, the right to choose a nonstate school, the right to choose a Catholic parochial school and the right to choose an independent non-Catholic school. That fundamental right must be a right quite irrespective of affluence. It must be a right for the humblest amongst us. It must be a right for people who are not affluent, who have not got the kind of earnings that are necessary to pay large fees, to pay $1,000 a year or more for their children's education.

What a quaint thing it is that those who attack the independent schools and who stand up here talking as they do about these things send their own children to independent schools and, if I may say so by interpolation, come along to Liberals and ask their help to get their children into those schools. That is the measure of the humbug of these people. Here is a situation in which with ordinary good sense and in the ordinary course of events one would say that the Government would believe in freedom of choice and would want to allow people to choose. One would think in ordinary good economics the Government would say: ' It is good business for people to go to independent schools. It saves the Government the tax burden of State schools.' If a taxpayer sends his child to a State school, primary school fees of approximately $600 a year and high school fees of at least $900 or $1,000 a year of taxpayers' money are saved. It lowers the pupilteacher ratio. It enables people who are presently at State schools to have a better go. The Government is saying: 'We will destroy this system. We will lower it.' That means that those people who send their children to independent schools will now have to pay substantially more in 2 waysbecause of inflation in fees and because of the reduction in the tax allowance. This is a punishment of a very large section of the community, lt is in fact a punishment of the whole of the community.

I move now to clause 17 which provides deductibility of mortgage interest. This is a very belated provision. It was promised in December 1972. It is now December 1974-2 years later. It was promised that it would be introduced after the Whitlam Government was elected to office. Two years have gone by. The whole of the matter is obscure and thoroughly unfair. It is unfair because it discriminates against a significant section of the community- a significant section of the underprivileged and poor of the community. I think these are the people whom the Government tells us it is elected to look after. If one gives preference to those people who are buying a home, one punishes by difference those who are renting a home. The rent of a home is the capital cost and maintenance cost of that home plus profit. So this Government is punishing all those who rent homes. It is an extraordinary situation.

I put that matter aside and move to the next situation which is the idea of allowing a tax deduction to ease the interest rate. This scheme is fated for destruction before it starts because the level of interest rates has risen so much since the Government promised to introduce tax deductibility that the measure of relief now cannot be as great. First of all, it is not possible with the existing interest rates for a person on the average weekly income to get a loan from a bank or a building society. It is not possible under the quartering formula. The quartering formula means that one cannot pay more than one-quarter of one's weekly wage as a mortgage repayment. To receive a loan of $22,000 today to buy the most modest of homes- if a person could get one- he would need to pay $240 a month- almost $60 a week. That means that under the quartering formula he would need to earn $240 a week. This is an illusion in itself. In the first place, the ordinary person in the future cannot benefit. It is true that those people who are paying off their homes now, having bought them during the time of the previous Liberal-Country Party Government, will obtain some measure of relief.

Let us examine this matter. Yesterday the Minister for Aboriginal Affairs, Senator Cavanagh, rebuked me for using figures of 15 per cent, 1 6 per cent or 1 7 per cent. This morning I looked at the short term interest rates for bridging finance. They are in fact higher than those figures. I read last night in the Press that in Victoria the permanent building societies will be putting up their interest rates to 14 per cent. This kind of interest rate will simply cost the ordinary person out of a home. How can the ordinary person buy a home? The Government has destroyed the homes savings grant scheme that had been one of the pivotal points of home purchase in Australia.

Senator Cavanagh - For some people.

Senator CARRICK - One of the very valuable points, because it gave them a help towards their deposit and a help without interest for bridging finance. The Government has destroyed that. What has it done? In its place, it has made the cost of a home impossible, as I have demonstrated. It has created all-time record interest rates. It has reduced the rate of building by half at least. It has depressed the industry to such a state that its recovery for some years to come will not be smooth and effective. Authoritative statistics show a lag of at least 50,000 homes now and a prospective lag next year of 100,000 homes. The amount of money, $150m, that the Government is proposing under another Bill to inject into the community through the banks to help housing would make provision for 7,500 houses, which is precisely the number of houses that the New South Wales Housing Commission has had to add in terms of demand to its books. There are now 35,000 urgent applications from low income earners for homes. In the face of a deficiency of approximately 50,000 homes and the prospect of a deficiency of 100,000 homes the Government's response is to create more scarcities by providing effectively about 7,500 extra homes through that measure. Lest it be said: Yes, but we have increased the savings banks' ratio from 60-40 to 50-50 to help housing', I point out that the Banks (Housing Loans) Bill is emphatic that it is regarded as the key to break through the problem of housing.

I point out also that in each of the States during the past 2 years of Labor Government the scarcity of serviced land- of housing blocks available for building- has increased chronically. The Government has made much of its claim that it has provided record funds for water and sewerage. At a time when the housing industry has collapsed and at a time when the Government could have overtaken the problem of servicing housing blocks in the city of Melbourne alone for a period of 3 years to 5 years there is a prospective serious shortage. At a time of mounting unemployment when we could be putting people to work in this servicing area to do the headworks we are moving in a slow and stolid way. This problem is being overtaken by massive inflation and massive costs.

The Bill attacks life assurance companies and by doing so reduces the benefits to be paid by the life assurance companies. Life assurance in this community is the little man 's saviour. The provident week by week payment at the door of a policy against retirement, accident or illness is the little man's provision for the future. In this situation the Government has reached out to impose punitive conditions upon life assurance companies to such an extent that now the returns to those people are going to be seriously diminished. I have pointed out the punitive attacks upon the mining industry. I have pointed out the great ambiguity regarding fringe benefits. I have commended the provisions regarding credit unions and child care. I have pointed out the hopeless confusion surrounding the mortgage interest deductibility provision. I have referred to the quite unfair reduction from $400 to $ 1 50 in the tax deductibility of educational expenses. I have referred to the attack on life assurance companies under clause 19 of the Bill by increasing by $25m the tax paid by life offices. That clause, of course, reduces the amount of calculated liabilities as deductions from 2 per cent to 1 per cent and therefore will reduce the bonuses.

There is under clause 35 provision for a rebate for low-income families. The Opposition supports that. There is a proposal in respect of hardship on taxpayers and dividends in Papua New Guinea. The Opposition supports that. Taking those things as such, the Opposition proposes to move 2 amendments to this legislation. To the motion for the second reading of the Estate Duty Assessment Bill 1 974 I propose to move the following amendment:

At end of motion, add- but the Senate is of the opinion that the provisions of the Bill do not provide adequate relief to the taxation of deceased estates in a period of unprecedented inflation.'

To the motion for the second reading of the Income Tax Assessment Bill (No. 2) 1974 I move the following amendment:

At end of motion, add- but the Senate is of the opinion that the provisions of the Bill which reduce the limit on deductions for education expenses from $400 to $150 seriously restrict the freedom of choice which now exists in the Australian education system, are a contravention of the Government's election undertakings and will impose unwarranted burdens on parents with children attending both public and private schools and. further, that the Bill specifically:

(a)   inadequately compensates home buyers for the massive rise in housing loan interest rates and takes no account of those persons unable to purchase a home:

(b)   jeopardises the bonuses of thousands of small investors by increasing the tax liabilities of Australian life assurance companies, and

(c)   further erodes the confidence of the Australian mineral industry by reducing vital incentives to investment'.

I commend the amendment and the proposed amendment to the Senate.

Senator LAWRIE (QUEENSLAND) - I second the amendment.

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