Monday, 2 June 1986 The PRESIDENT (Senator the Hon. Douglas McClelland) took the chair at 2 p.m., and read prayers. The Clerk —Petitions have been lodged for presentation as follows: To the Honourable the President and members of the Senate in the Parliament assembled. The petition of certain citizens of Australia respectfully showeth: that all legitimate business expenses incurred in earning or producing assessable income should be allowable deductions. that the proposed capital gains tax is an unwarranted burden on the rural and small business sectors, which will severely affect their long term viability. that the delay by the Government in introducing the legislation into Parliament, full details of which still had not been revealed after it had legally been in operation for more than six months, has caused confusion and hindered farmers and small business people in the organisation of their affairs. Your petitioners humbly pray that the Government introduces the capital gains tax legislation without delay and the Australian Democrats join with the Opposition to defeat the proposed legislation. by Senators Michael Baume (from 104 citizens) and Chaney (from 26 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned shows: Graduated family allowances are of important assistance to families with more than one child. All family allowances, whether for one, two, three or more children, have not kept pace with inflation. There are suggestions that all family allowances should be paid at the one flat rate. This would severely disadvantage families with more than one child. Your petitioners therefore pray that the Senate, in Parliament assembled, should reject any suggestion that family allowances be paid at a flat rate and instead should ask the Federal Government to increase the value of existing payments. And your petitioners as in duty bound will ever pray. by Senator Reid (from 35 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The humble petition of the undersigned citizens of Australia respectfully showeth: That we the undersigned, having great concern because of the spread of moral pollution in our nation call upon the Government to introduce immediate legislation: 1. To provide strict controls over importation, production, sale, hire or mailing of video-cassettes with the open sale of only G, PG, and M rated video-cassettes; and the total prohibition of the sale of R-rated video-cassettes so that R rated films can only be viewed in an adult theatre by persons over 18 years. We totally reject the concept of ``X'' rated video-cassettes which could allow the legal sale of hard-core pornographic films for screening in the homes of our nation, which endanger our children. 2. To dramatically improve the Federal Attorney-General's Guidelines for Classification of Video tapes/discs which restrict the importation, production, sale or hire, screening in private homes and mailing by Australia Post so as to include the total prohibition of any pornographic, obscene or blasphemous video cassette, or film containing child pornography, bestiality, sodomy, group sex, violent sex acts with women, such as rape and pack rape, sadism and torture, etc. Your petitioners therefore humbly pray that your honourable House will protect our society, especially women and children from moral pollution and its harmful effects. And your petitioners as in duty bound will ever pray. by Senator Richardson (from 11 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The humble petition of the undersigned citizens of Australia, respectfully showeth: That the Bill of Rights and the Human Rights and Equal Opportunity Bill: 1. Offer nothing more than is already available under law, 2. deny some Human Rights and do not include others, 3. give dangerously wide powers to an unelected body, and 4. could cause far more damage than they could possibly cure. Your petitioners therefore humbly pray: That the Senate should: Completely reject the Bill of Rights and the Human Rights and Equal Opportunity Bill. And your petitioners as in duty bound will ever pray. by Senator Richardson (from 24 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned respectfully shows: That we strongly support `The Australian Capital Territory Smoking and Tobacco Products Advertisements Prohibition Bill' introduced by Senator Evans, because it represents the first positive national step towards the eventual elimination of widespread serious ill health caused by smoking tobacco. by Senator Vigor (from 150 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned shows: (1) The Agreement between the United States of America and Australia concerning the Joint Defence Space Research Facility at Pine Gap may be terminated by either Government on one year's notice from 19 October 1986. (2) In the event of war between the United States and the Soviet Union, access by the United States to Pine Gap makes it a probable nuclear target. (3) Access by all nations to Pine Gap's capacity to monitor and verify compliance with existing and future nuclear limitations treaties could contribute to world peace and security. (4) The people of Australia are entitled to be consulted, through their representatives in Parliament, on any extension or modification of the Agreement affecting their lives, security and welfare and your petitioners humbly pray that: (1) The Agreement between the United States and Australia concerning the Joint Defence Space Research Facility at Pine Gap be terminated on one year from October 1986. (2) Public discussion and inquiry be instituted into the feasibility of negotiating a new agreement with the United Nations during the International Year of Peace offering the verification facilities of the Pine Gap base to all nations. (3) Any agreement concerning the future use of Pine Gap be referred to Parliament for ratification. And your petitioners as in duty bound will ever pray. by Senators Coates (from nine citizens), Robertson (from seven citizens) and Tate (from eight citizens). To the Honourable the President and members of the Senate in the Parliament assembled. The petition of the undersigned citizens of Australia showeth: That many Australian wage and salary earners and self-employed persons do not enjoy secure retirement incomes provided by superannuation; and That the Government issued in December 1985 Guidelines for the implementation of the proposed productivity decision by the Conciliation and Arbitration Commission and draft Operational Standards for Superannuation schemes. Your petitioners therefore humbly pray that the Government: 1. Guarantees to every employee the right and freedom to select the superannuation scheme of his/her choice. 2. Protects the individual exercising that freedom of choice from any coercion, influence or other pressure which may be applied by an employer, association or trade union. 3. Will recognise only those schemes which provide genuine superannuation and reject those schemes which do not provide for- preservation of benefits to retirement vesting of employer contributions equal employer and employee Trusteeship control to ensure security of investments. And your petitioners as in duty bound will ever pray. by Senators Harradine (from 51 citizens) and Townley (from 90 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned members of the Shop, Distributive and Allied Employees' Association and Australian citizens respectfully showeth that: 1. The Sex Discrimination Act, passed by Parliament in 1984, will automatically make unenforceable from 1st August 1986 the weight lifting limits applicable to women employees and contained in State laws, regulations and awards. 2. These weight lifting limits have applied throughout Australia for many years and have acted to prevent many injuries at the workplace, thereby avoiding much suffering and loss of working time. 3. The removal of this protective legislation will increase the rate of injury among women employees and lead to greater Workers' Compensation costs for employees. 4. The weight lifting limits do not in any way hamper the achievement of equality and equal opportunity in employment for women employees in the workforce. Your petitioners therefore pray that Parliament will amend the Sex Discrimination Act to enable the weight lifting limits for women employees to continue. And your petitioners as in duty bound will ever pray. by Senator Harradine (from 782 citizens). Petitions received. Senator REID(Australian Capital Territory) —I give notice that, on the next day of sitting, I shall move: That the Senate- (a) take note of the draft Australian Capital Territory Children's Services Ordinance; (b) condemns the provision which requires groups such as Brownies, Cubs, ballet classes, Little Athletics, the Girls Brigade, Sunday schools, calisthenics groups, the Young Men's Christian Association (YMCA), the Young Women's Christian Association (YWCA), theatre groups and similar children's groups, to be registered and then to apply for an exemption from the application of the Ordinance; and (c) calls on the Federal Government to delete that provision from the draft Ordinance. Senator VIGOR(South Australia) —I give notice that, on the next day of sitting, I shall move: That the Senate- (a) notes that the Governor-General's Address at the opening of the 33rd Parliament of the Commonwealth of Australia on 21 April 1983, included the sentence: `My Government is committed to bringing self-government to the Australian Capital Territory'; (b) recalls the public speculation in May 1985 by the Minister for Territories (Mr Scholes) that the self-government legislation would be introduced and passed in the 1985 Budget session; (c) notes that single-member districts have never been used in Australian Capital Territory elections since the inception of the Advisory Council in 1930, and that every public inquiry into Australian Capital Territory self-government has recommended the continued use of proportional representation; and (d) calls upon the Federal Government to raise the Australian Capital Territory Council Bill 1986 from the bottom of the legislative scrap-heap for debate without further delay, unless this is the manner in which the Government prefers to acknowledge publicly that its actions in relation to the Australian Capital Territory self-government have been `a sham' from the start. Senator WALTERS(Tasmania) —I give notice that, on the next day of sitting, I shall move: That so much of the Standing Orders be suspended as would prevent the Joint Select Committee on Video Material meeting during the sitting of the Senate on Wednesday, 4 June 1986. Senator MICHAEL BAUME(New South Wales) —I give notice that, on the next day of sitting, I shall move: That the Senate- (a) notes that as a result of the announcement of the Prime Minister (Mr Hawke) on 2 June 1986, the Treasurer's (Mr Keating's) much heralded mini-summit (of which Mr Hawke was not to be a member) has now been rendered irrelevant by Mr Hawke's decision to chair meetings with business and union leaders this week, prior to his making a major statement on the economy next week, rather than allowing Mr Keating so to do; (b) regrets that this major statement will not be made to the Parliament as the Federal Government intends that the House of Representatives should rise on 5 June 1986, thereby preventing the Government's economic incompetence from being debated by that Chamber and protecting Mr Hawke and Mr Keating from facing the Parliament to explain their serious disagreements that are now gravely damaging the Government's ability to introduce the urgent measures needed to get Australia out of what Mr Keating describes as `the hole that Australia is in'; and (c) calls on the Government at least to face the Parliament over this economic mess it has got Australia into, even if it is not prepared to face the people. Senator GRIMES(Tasmania-Manager of Government Business) —I table papers in accordance with the list circulated to honourable senators. With the concurrence of the Senate, I incorporate the list in Hansard. Leave granted. The list read as follows- 1. Visit to Japan, China and the Philippines-text of a statement by the Prime Minister. 2. Inter-governmental aspects of the provision of post-arrival services for immigrants-advisory council for inter-government relations report 10-pursuant to section 7 of the Advisory Council for Inter-government Relations Act 1976. 3. Guide to the assessment of rates of Veterans' pensions-document-pursuant to sub-section 29 (7) of the Veterans' Entitlement Act 1986. 4. Treatment principles-document-pursuant to sub-section 90 (6) of the Veterans' Entitlements Act 1986. 5. Repatriation Pharmaceutical Benefits Scheme-document-pursuant to sub-section 91 (4) of the Veterans' Entitlements Act 1986. 6. Vehicle Assistance Scheme-document-pursuant to sub-section 105 (4) of the Veterans' Entitlements Act 1986. 7. Veterans' Children Education Scheme-document-pursuant to sub-section 117 (4) of the Veterans' Entitlements Act 1986. 8. Independent Schools Loans Guarantee Scheme-statement of the payments made in 1984-85-pursuant to sub-section 8 (1) of the Independent Schools (Loans Guarantee) Act 1969. 9. Non-Government Schools Loans Guarantee Scheme-Annual Report 1985-pursuant to sub-section 12 (1) of the Non-Government Schools (Loans Guarantee) Act 1977. 10. Curriculum Development Council-Annual Report 1985-pursuant to sub-section 14p (2) of the Commonwealth Schools Commission Amendment Act 1984. 11. Australian National University-Annual Report 1984-Part 2-plus a statement of explanation on the delay in presentation of the report-together with the Auditor-General's Report-pursuant to sub-section 33 (3) of the Australian National University Act 1946. Senator CHANEY —Does the Leader of the Government in the Senate agree that the current national wage case could have a major impact on Australia's economic position and prospects? Does the postponement of this week's summit mean that the Government has given away any chance of asking the Australian Conciliation and Arbitration Commission to take the present perilous economic situation into account in making its far-reaching decision? If so, how does the Government justify this abrogation of its responsibility to do something effective about the economic situation? Senator BUTTON —I agree that this current national wage case is important. It is important to a variety of people for a variety of reasons. It is important under the accord because it represents a case which would provide indexed wages based on the consumer price index for the 1985 September and December quarters and an enormous time lag since those price increases were incurred in those quarters. So it is important to wage earners for that purpose. It is important to industry for different purposes because I take the view that, of course, in a sense it bears on the capacity of industry to be competitive-any increase does. That does not mean for a moment that there should not be increases, of course. The important thing about it all is that this wage case must be seen in the context of past wage cases and future wage cases. It is important that the Government has a prices and incomes policy which provides certainty, continuity and, as far as possible, wage restraint, which it has done. One has only to look at the effects in terms of reduction in real unit labour costs in the last two years to see that that effect has been taking place. Whether or not that is enough is a question which is currently the subject of some debate. In respect of the second part of the question, whether the postponement of what Senator Chaney is pleased to call the summit set for later this week means that the Government has abdicated the possibility of making any impact on the current wage case, or in any way putting views to the Commission about the current wage case, the answer to that question is no. Senator CHANEY —Mr President, I ask a supplementary question. My supplementary question relates to the latter part of the Minister's answer. I ask the Minister can he clarify whether he is saying that the Government still may be going to submit further views on the economy to the Commission before it brings down its decision on the current wage case? Senator BUTTON —Senator Chaney asked me a specific question: Does that mean that the Government will not have the opportunity to put anything to the national wage case? The answer to that question is no. Whether it will avail itself of that opportunity and in what form is not for me to say at this time. Senator COATES —My question is directed to the Minister representing the Minister for Foreign Affairs. Has Australia made representations to the United States of America urging that country not to abandon the SALT II Treaty? If not, will the Minister for Foreign Affairs please make such representations on behalf of Australia and in the interests of world peace, especially in view of the attitude expressed by European members of the North Atlantic Treaty Organisation? Senator GARETH EVANS —As I indicated last week, Australia attaches very great importance to the existing regime of nuclear arms control, including the SALT II Treaty, because of the very important degree of predictability it establishes and because it does provide, even though not ratified by the United States Senate, a basis for negotiating new agreements to reduce the level of armaments, both nuclear and conventional. Australia is concerned about the United States decision not to be bound in the future by SALT II. The Prime Minister will be writing to President Reagan-if indeed he has not already; I have not been able to check out whether that letter was signed in the last 24 hours-as he has in the past to express Australia's concern that the principles of SALT II should be maintained as far as possible. Senator MESSNER —My question is addressed to the Minister representing the Treasurer. I refer the Minister to the concerns expressed by the Prime Minister at Canowindra on Saturday about the impact of the fringe benefits tax on the rural community and in particular as it affects accommodation provided on farms. Has the Prime Minister's promise to investigate the extent of the problems for farmers been referred to the Treasurer and considered by the Government? Does the Government intend to take any action either to discontinue the tax or to alleviate its impact on rural employers in the light of the fact that the legislation is before the Senate at the moment? Senator WALSH —I did not read anything about that matter, which I think was the question, although I did hear something about it. I am afraid I do not know. I will refer that to the Prime Minister and/or the Treasurer. Senator McKIERNAN —My question is directed to the Minister representing the Minister for Employment and Industrial Relations. Is it a fact that the Government and the Australian Council of Trade Unions, in recognition of the inflationary effects of the devaluation of the Australian dollar, have made submissions to the national wage case hearing that would reduce wage rises due to Australian workers by 2 per cent? Has the Australian work force accepted the need and urgency for discounting of wages and salaries? Have the professions, senior executives and others in receipt of large salaries also accepted the need for restraint on salaries, dividends and other forms of income? Finally, has the Minister's attention been brought to an article in the National Times of 30 May to 5 June headlined `Business executives get big rises while they urge wage restraint', and what is the Government's response to the contents of the article? Senator WALSH —It is, of course, a fact that the Government and the ACTU have recognised the need for discounting in the current national wage case. Everybody expects that the Australian Conciliation and Arbitration Commission will agree with that and that there will be a 2 per cent discount when the judgment is finally handed down. I think one can say with equal confidence that the Australian work force in general, certainly its peak council, has accepted the need and urgency in the general economic interests for that to happen. In regard to the professions, senior executive and similar income recipients, it is more difficult to say with any degree of certainly whether they have similarly accepted the need for restraint in their individual claims on national income because, firstly, there is probably a great deal more diversity within that group than there is in the wage earning population and, secondly, there is no centralised system under which a generally agreed policy could be either put in place or subsequently monitored. My attention has been drawn to the article in the National Times. It cites research on salaries in 150 top management jobs by the consulting firm of Cullen, Egan and Dell which shows that senior management salaries have increased by almost 12 per cent in the 12 months up to 1 April. In that same period the increases in average weekly earnings were around 6 per cent and in award wages 6.6 per cent over the last calendar year. If that survey finding is reliable it is disturbing to learn that the managerial and executive employees, for want of a better term, have taken for themselves wage increases almost double that of wage earners in general. It is particularly disturbing when one recognises that it is from that group that the strongest and most sanctimonious exhortations to the rest of the work force are being made-exhortations on the rest of the work force that it must moderate its individual demands on national income. That survey at least shows that the people who are making those sanctimonious demands on exhortations are not following their own advice. The same article in the National Times cites the increases granted to directors' fees for some 20 leading Australian firms. There are some complications there because of changes in functions of directors, but increases in the 12-month period range from a bottom figure of minus 0.12 per cent to a top figure of some 80.7 per cent. I should add that the minus figure is certainly aberrant, being the only minus figure; and only four of the 20 or so firms have had increases in less than double figures in directors' fees. I note that the survey by Cullen, Egan and Dell did not take into account any increases in superannuation. So it is possible that the total salary packages, to use the euphemism which has become popular in recent years, increased by even more than the direct remuneration figures show. All that being so, I think those comparisons are invidious and I would hope, and the Government would hope, that in the present climate, and particularly in view of the Australian Statistician's publication last week of the huge adverse movement in Australia's terms of trade that has taken place over the last 12 months and the consequential reduction in the national income, the managerial and executive class will practice what it preaches and moderate its demands on national income as well as exhort the work force in general. Senator CHIPP —I direct my question to the Minister representing the Minister for Defence. Has the Government seen the extraordinary disclosure in documents released over the weekend by the United States Nautilus Pacific Research Institute that there were 381 naval related nuclear weapons accidents from 1965 to 1977 and the unbelievable statistic that the United States Navy had accidentally released nuclear weapons in 1965, 1968, 1969 and 1970? Is the Government concerned that these ships carrying nuclear weapons of the same Navy are visiting Australian ports with increasing frequency? If a nuclear weapon was accidentally released, say in Sydney Harbour, would we be able to cope with it? In the light of the Nautilus information, will the Government be following up the 1981 United States recommendation to conduct joint simulated nuclear weapons accidents under realistic conditions in Australian ports and Australian airfields? Senator GARETH EVANS —I have indicated on previous occasions that the Australian Government is satisfied that safety procedures taken on board visiting warships effectively preclude the possibility of nuclear weapon detonation. Given the construction and safety features of a modern warship, we believe that the spread of radiation outside a vessel by conventional explosion or fire is almost equally as remote. The United States Navy has acknowledged that during the period 1965-85-a 20-year period-it experienced 630 accidents or incidents involving nuclear weapons. There is no evidence, however-- Senator Chipp —That is a great safety record, isn't it? Senator GARETH EVANS —Just hear me out, Senator. There is no evidence that any of these mishaps has resulted in an explosion or a leak of radioactive material. The reason for the high number of accidents or incidents results from the United States Navy's very stringent system of reporting all mishaps, however minor, involving nuclear weapons, their components and even simulated nuclear weapons involved in training. The only serious incidents appear to have been losses of weapons while warships were at sea. One of these resulted from the loss of a nuclear armed fighter aircraft in the Western Pacific in 1965. At least one other may have been due to the loss of the submarine USS Scorpion in 1968. Australia is responsible for emergency planning for, and control of, responses to possible nuclear accidents in Australian harbours and has its own national procedures. This planning is undertaken, as I have indicated in response to other questions, particularly from Senator Vallentine recently, by State and Territory governments in consultation with Federal Government agencies. In the unlikely event of an accident the Australian Government would expect the United States to provide the maximum assistance feasible in the circumstances. Australia receives reports of United States nuclear weapons accident exercises and has sent observers to them. The issue of nuclear weapons accidents at Australian airports, which was one part of Senator Chipp's question, does not arise. United States B52 aircraft undertaking low level navigation training and maritime surveillance which transit Australia are, as I have said a dozen times on behalf of the Minister for Defence, unarmed and carry no bombs. In regard to the last part of Senator Chipp's question-whether the Government will be following up the 1981 United States recommendation to conduct joint simulated nuclear weapon accidents under realistic conditions in Australian ports and Australian airfields-we do, as I say, send observers to the United States exercises. I will refer that part of Senator Chipp's question specifically to the Minister and seek a further detailed response. Senator CHIPP —I ask a supplementary question. The Minister, in answer to my original question, said that the Australian Government `is satisfied with the safety requirements of United States warships'. I take it from that that this Government is satisfied that the record of 630 nuclear accidents in 20 years is satisfactory? Senator GARETH EVANS —I remind Senator Chipp of what exactly I did say. I said that we are satisfied that safety procedures taken on board visiting warships effectively preclude the possibility of nuclear weapon detonation. None of the incidents to which I referred, or to which Senator Chipp referred, involved detonation or anything remotely like it. Senator JONES —My question is directed to the Minister representing the Minister for Primary Industry. In view of the undertaking given this weekend by the Prime Minister and the Minister for Primary Industry that an investigation will take place to find out whether Australian banks are charging higher interest rates to farmers than other members of the community, will the Minister outline the scope of the inquiries that are to take place? Further, is there any evidence available that banks have been dealing in a fair manner with the public at large since they were allowed to lift the ceiling on new home loan interest rates? If not, is there any chance of the Government broadening the inquiry to take that into account? Senator WALSH —I personally am not aware of any definitive or authoritative evidence on this question of whether the banks are charging excessive rates to farmers. I have heard directly some anecdotal evidence which shows that the rates being charged are substantially higher than those charged to business borrowers in general. Even after allowing for the possibility of some premium being charged for additional risk, they do seem to be a bit high. But that evidence is anecdotal. The question was addressed in general terms in Mr Kerin's economic and rural policy statement on 15 April and subsequently, at the request of the Prime Minister's country task force, chaired by the honourable member for McMillan, Mr Cunningham, Mr Kerin met with senior executives of a number of banks on 16 May and is preparing to report to the Prime Minister and the Treasurer on the outcome of those discussions. The issues raised at that meeting included, among other things, banks' overall lending margins, the alleged imposition of penalty interest rates on rural borrowers, the level of administration and other bank charges, the criteria used in assessing applications for loans and the treatment of farmers in financial difficulty. The Prime Minister will consider that report from Mr Kerin and will follow up any aspects raised at his meeting with a number of farmers last Saturday which have not adequately been resolved in discussions so far. Senator CHANEY —My question is directed to the Leader of the Government and follows the question to the Minister for Finance from Senator Messner about the possible reconsideration of the fringe benefits tax and its application to the farming community. I draw the attention of the Leader of the Government to the Minister for Finance's lack of knowledge about the matter. In light of the fact that the fringe benefits tax is to be dealt with in the Senate today and in light of the Prime Minister's statement to the farmers at Canowindra on the weekend that he, the Prime Minister, had not realised the extent of the problems for some farmers and would have a look at the matter and become informed of the factual situation, I ask the Minister: Is the Government going to reconsider the matter, or was the Prime Minister simply duchessing the farmers at Canowindra to get himself past an awkward meeting? Senator BUTTON —First of all, it was not an awkward meeting. I am not familiar with the precise matters which were discussed in respect of the fringe benefits tax. I think it would be wrong to assume that any further consideration of the fringe benefits tax, if there was one, would have any bearing on the passage of this legislation as far as the Government was concerned. I will try to obtain a more detailed answer from the Prime Minister and will give it to Senator Chaney as soon as possible. Senator CHANEY —I have a supplementary question. In view of the fact that we are to debate this legislation this afternoon, I ask the Leader of the Government whether he will seek to get a reply for the Senate before we resume that debate. Senator BUTTON —Yes. Senator MORRIS —Has the Minister for Education and Minister assisting the Prime Minister on the Status of Women seen Press reports concerning the expiry of exemptions under the Sex Discrimination Act for legislation limiting the weight of goods women are expected to lift in their employment? Will the Minister comment on statements made by the Shop Distributive and Allied Employees Association that from 1 August, unless the Sex Discrimination Act is amended, women shop assistants and junior males will no longer be covered by legislation limiting the weight of goods they are expected to lift? Senator RYAN —Yes, I am aware of the matters raised by the letter of the Shop Distributive and Allied Employees Association concerning the effect of the Sex Discrimination Act on the weight of goods women are expected to lift. The Government is concerned about the issues raised by the SDA and has taken a number of steps to meet these concerns. Our basic position is that the Sex Discrimination Act should not adversely affect the working conditions of women. Existing weight limits applying to juniors and women provide no protection for adult men and may not provide wholly adequate protection for women. The National Occupational Health and Safety Commission is preparing a discussion paper on manual handling, including recommendations in relation to existing provisions which differentiate on sex and age, and a draft code of practice on manual handling. In the meantime, the Government recognises that a limited extension for specified State legislation intended to protect women in employment is justified. Such an extension would allow time for the State governments to complete their reviews of discriminatory legislation, for a conference on restrictive legislation to be held, and for any necessary changes to the State Acts and regulations to be made. The conference on restrictive legislation will be a forum to gain broad agreement on a firm timetable for implementation of the necessary changes to legislation, regulations and awards. Occupational health and safety concerns, such as those raised in the letter of the SDA, will be fully addressed. The Prime Minister has recently written to the Secretary of the Australian Council of Trade Unions advising him that the Government supports an extension of the exemption for 12 months for specified State legislation. Letters have also been sent to State Premiers and the Chief Minister seeking their urgent advice on protective employment legislation which they believe merits preservation. Senator PARER —My question is directed to the Minister representing the Treasurer. Does the Minister agree with the Treasurer's description of the now adjourned Advisory Committee on Prices and Incomes economic conference as the most comprehensive discussion of issues since the summit of 1983? If so, why has such an important meeting now been relegated until after the Prime Minister's address and after the result of the national wage case is known; in other words, after the major economic decisions have been taken? Senator WALSH —The reasons are set out quite clearly, I think, in the Prime Minister's Press statement which Senator Parer may not have had a chance to read. I do not intend to bore the Senate by reading all of it, but I will pick out some of the highlights. It states: The most recent economic statistics, notably the March quarter; National Accounts and the ABS Survey of Investment Intentions graphically highlight the magnitude of the economic task before Australia. While no major change in direction is required the statistics provide further confirmation of the need for some modification to our already successful policy . . . The more substantive part reads: In the Government's view discussions at ACPI will be most fruitful if both the outcome of the NWC and the details of proposed modifications to the Government's policy stance are known to participants in advance. This view is also now shared by representatives of business and the ACTU The two important things which have happened since the Treasurer made the statement were, firstly, that the quarterly national accounts figures were published. Although history shows that frequently those figures are subject to very substantial revision, they are certainly cause for concern. Most importantly, the outcome of the national wage case is not known now and informed opinion is that it will not be known for several weeks. There was little point in holding that tripartite meeting until the outcome of that case was known. Senator REYNOLDS —I address my question to the Minister representing the Minister for Arts, Heritage and Environment. Is the Minister aware of extensive concern among Australian actors about Federal Government plans to ease restrictions to allow more overseas actors-many of somewhat doubtful artistic merit-to work in this country? Will the Minister convey this concern to her colleague Mr Cohen and recommend that early consultation is held with Actors Equity to ensure that Australian actors' interests are fully protected and overseas artists' entry is appropriately controlled, so that only artists of exceptional quality enter on the same basis which has been successfully operating for many years? Senator RYAN —I will be happy to convey those sentiments to the Minister for Arts, Heritage and Environment. I must say that I endorse the sentiments that Senator Reynolds expressed in her question. Senator PETER BAUME —My question is directed to the Minister for Education. I remind the Minister that on Friday, 30 May she was asked a question by Senator Reid about whether consideration had been given to the transfer of the Australian Capital Territory Apprenticeship Board to the Department of Territories. I remind the Minister that in her answer she said that consideration has been given to the transfer and, further, that the matter has not yet been finalised. I ask: Was the Minister telling the truth to the Senate? Senator RYAN —I have nothing further to add. Senator PETER BAUME —Mr President, I ask a supplementary question. Is the Minister aware that the transfer which she said was not yet complete was completely by way of the Seat of Government Administration (Amendment) Ordinance 1986, dated 10 April? Will the Minister confirm that she has misled the Senate, albeit unwittingly? Senator RYAN —When I was asked a question by Senator Reid the other day, I recalled that I had accepted advice from my Department that the transfer should go ahead. I could not recall whether the machinery has been set in progress for the matter to go ahead. If Senator Baume has been able to establish that it has, that is quite useful. But he is certainly dramatising the fact that there is a time lapse between a Minister agreeing to a course of action and that course of action being carried out. Senator COLSTON —My question is directed to the Minister representing the Minister for Immigration and Ethnic Affairs and it relates to an advertisement placed by the establishment Jimmy's on the Mall on the front page of last Saturday's Courier-Mail in which it was stated that in August a sushi chef would be arriving from Japan. Has a chef from Japan been given a visa to enter Australia and work at Jimmy's on the Mall and, if so, what are the details of his visa? Has the Department of Immigration and Ethnic Affairs made any inquiry of the relevant union or unions, either direct or through the Department of Employment and Industrial Relations, about the possible employment of a Japanese chef at this or other locations in Brisbane? If so, what response did the unions make and, if applicable, what advice was given by the Department of Employment and Industrial Relations? Senator GRIMES —The Minister for Immigration and Ethnic Affairs has informed me that an employer nomination for a sushi chef for Jimmy's on the Mall was approved by the Brisbane office of the Department of Immigration and Ethnic Affairs on 13 May last. The precise visa details are not known but they are subject to the nominee meeting the normal immigration requirements, including satisfactory health and character. The nomination was cleared after advertising for such a position in the Brisbane Courier-Mail and the Sydney Morning Herald drew no applicants. The Commonwealth Employment Service waived labour market testing and the Department of Employment and Industrial Relations endorsed nomination on labour market grounds because there were no sushi chefs around, I gather. The Department of Employment and Industrial Relations is the normal contact for the unions. The Minister for Immigration and Ethnic Affairs is unaware of any contact with the unions on this case or of any comments that the unions may have made. However, the Department of Employment and Industrial Relations had advised the Department of Immigration and Ethnic Affairs in Brisbane that the Liquor and Allied Industries Union will write to the Minister for Immigration and Ethnic Affairs on the general question of migration of chefs. The Minister assures me that the applicant is a high class, well-qualified chef and that no other Japanese chefs have been recruited recently for Brisbane locations. Senator BOSWELL —My question is addressed to Senator Georges in his capacity as Chairman of the Senate Select Committee on Animal Welfare. Senator Georges will recall from the trip on which I accompanied him through rural Queensland the concern and fears felt by primary producers about the Animal Welfare Committee. Can he inform the Senate and primary producers whether he is still the Chairman of that Committee or does he intend to stand down during his suspension from the Australian Labor Party? If so, will he return as Chairman of the Committee after he has done his three months in the sin bin? Senator GEORGES —If I could, I would pass that question swiftly to Senator Cooney. Unfortunately that is not possible. The chairmanship of the Senate Select Committee on Animal Welfare has been a matter of discussion. On my suspension from the Australian Labor Party I took the view that, having been relieved of all other positions in the Party, my position on both the Animal Welfare Committee and the Public Accounts Committee was by virtue of my position in the Party. As far as chairmanship of the Animal Welfare Committee is concerned, I approached Senator Cooney and he recoiled in horror at the suggestion that he should chair that Committee. The other two members of the Committee have taken the view that I should remain. Therefore, the rural interest can speculate a little further. I suggest that they do not start cheering. I have received many letters requesting me to remain as Chairman of the Committee, but I have not received one from the National Farmers Federation. As to the matter of the sin bin, yes, I am in the sin bin. It is a different type of sin bin. I have to behave myself while I am in the sin bin otherwise I will not be allowed to return to the game. Senator ELSTOB —My question, which is directed to the Minister representing the Treasurer, concerns the Government's taxation strategy. Has the Government's attention been drawn to reports that the Catholic Church in South Australia has expressed support for the Government's taxation strategy? Can the Government inform the Senate of the nature of that support? Senator WALSH —I have had my differences with the Catholic Church over a few issues although, to get the record straight, I have never been a member. Most people seem to think I have been a member. My attention has been drawn to this issue and to the statement by the Director of the South Australian Catholic Family Welfare Bureau, Mr Joseph O'Neill, who issued a telex supporting the Government's tax reform package, although I should add for complete accuracy that he was somewhat critical of our not having gone further than we did in some areas. Although I have had differences with the Catholic Church and its agencies from time to time I always thought it could be relied on on income distribution questions to do what I and the Government would regard as the morally correct thing. In this case as in most cases it has not let me down in that judgment. It is obvious, of course, that the Opposition does not agree with the moral judgments made on the tax reform package and on income distribution questions by this agency of the Catholic Church. Senator Elstob also asked me about the Government's strategy on tax reform. It is basically to broaden the income tax base in order to reduce marginal tax rates by introducing a fairer system which eliminates an assortment of rorts which have been getting worse as time goes by and which, if allowed to continue unchecked, would have massively eroded the income tax base and consequentially, would have required higher and not lower marginal and average tax rates. The Government has addressed that issue of broadening the income tax base in a variety of ways, but the principal way in which it has pursued that objective is by legislating in a way that encourages and provides incentives for employees to be paid in cash and not in kind; that is, an employee should receive wages instead of subscriptions to the Melbourne Club, school fees being paid at Geelong Grammar for his children, or overseas family travel and that assortment of so-called fringe benefits that progressively had been quantitative and more important over time and had provided a substantially eroded income tax base, to the detriment of the decent, administrable and fair system and to the disadvantage of the great bulk of taxpayers. Senator HILL —Is the Leader of the Government in the Senate aware that the rate of youth unemployment is now nearly 23 per cent, which is no better than it was when the Australian Labor Party came to power in March 1983 and which is 6 per cent higher than the average of the Fraser years? Is the Minister aware that the average duration of unemployment among full time workers has risen to 49 weeks in March of this year, compared with 35 weeks when Labor came to office? Given these facts, will the Government abandon the fringe benefits tax which will be both inflationary and job destroying and the accord which has helped to give Australia unacceptably high inflation, undermined our international competitiveness, created record real interest rates and contributed to an appalling balance of payments situation? Senator BUTTON —I used to be fairly impressed with Senator Hill. He has emerged as a very amateurish sort of ideologue by this question. I did hear all his mini statistics, if I might call them that. It is not true that youth unemployment is at as high a rate as it was at the end of the Fraser years. I do not know what the honourable senator is purporting to illustrate, but there is not much point in saying that the unemployment rate is 6 per cent higher than the average for the Fraser years. We have never said that unemployment for either young or older people was high in the earlier years of the Fraser Government; it just got worse and worse as time went on. That was the problem. That was the matter to which we have drawn attention and to which we have objected. It is silly to strike an average for the purposes of making a pedantic little heuristic point in the Senate. The honourable senator talked about the duration of unemployment rising to 49 weeks amongst people who are unemployed for a longer time-the sort of hard core unemployed, as they are sometimes called. I was not familiar with that statistic. I will certainly have that matter examined and will be able to make some comment on it in due course. I think the point which probably sticks in the honourable senator's craw is that whatever he wants to say about these figures, which are sort of sub-figures of a bigger scene, under this Government the unemployment situation in this country has been greatly improved for all workers, including younger workers. The participation rates are at a record high level. Senator Archer —At the expense of the deficit. Senator BUTTON —The Archer solution. That is very interesting. The employment record of this Government is satisfactory. We cannot say that it is anything to be complacent about, but certainly, in terms of the numbers of jobs that have been created and so on, and the reduction in the levels of unemployment, the Government has made more progress than it promised it would do; and the community is fairly satisfied with that, even if Senator Hill is not. I come to the absurd point of the honourable senator's question. He went, if a I might say so, from the less than sublime to the absolutely ridiculous when he asked whether the Government would abandon the fringe benefits tax and the accord as a solution to the problem which he tried to establish with those rather shonky little figures that he produced. The answer to both those questions is no. If the honourable senator's Party came into government, I have no doubt that it would do both. I also have no doubt that unemployment would rise, that inflation would rise, that we would be back to the old wage spiral which characterised the last shaky years of the Fraser Government, and that we would have five years of industrial warfare, as the honourable senator's lawyer leader proclaims. I think all those things will happen. I want the honourable senator's Party to try that some day, if it ever gets the opportunity. It is not going to be us. Senator MAGUIRE —My question is directed to the Minister for Resources and Energy. Has the attention of the Minister been drawn to a petition on petrol prices being circulated in country areas of South Australia? If so, does the Minister accept the petition's claim that rural petrol users are subsidising those in the cities? Has the Minister anything further to add to his answer to my question on country petrol prices on 14 April? Senator GARETH EVANS —I have explained on previous occasions why it is that petrol prices tend to be higher in country areas as compared with the metropolitan scene-because of the higher cost of supply to consumers in country areas, the higher wholesaling and retailing costs associated with the smaller sales volumes in those areas and also the reduced competitive situation which means that country and regional areas tend not to get the benefit of discounting. Senator Michael Baume —And the cost of freighting it there. Senator GARETH EVANS —I have said that. I referred to the higher costs of supply, which, I think the honourable senator would appreciate, include the cost of freight. It is still the case that the Commonwealth does give a very substantial freight subsidy-above a level of 5.2c per litre-for any freight costs incurred beyond that particular maximum. We are not aware of any cross-subsidies that are inherent in the pricing structure for petroleum products-that is to say, higher margins being received by the companies for country sales as a matter of course-although, from time to time, no doubt those margins do tend to be a little higher for the reasons that I have already spelt out. I have indicated also on previous occasions that any attempt to regulate the scene in the rural and regional areas in order to try to equalise the situation to a greater degree than exists at the moment is destined to failure because of the pressures to which I have referred and that there would be unnecessary and unhappy distortions introduced into petrol marketing were a greater degree of uniformity of pricing to be insisted upon. In any event, that is something that the Commonwealth cannot effectively do with its present limited constitutional powers. It must be a matter for the States. The sum total of all that is that the Australian Democrats' petition that is being circulated that I have seen Press reports about, although I have not seen the terms of it, really is quite misconceived insofar as it expressly or impliedly suggests that there is any blame to be borne by governments, or anyone else for that matter, for the differential in pricing which does exist and which is undoubtedly a source of grievance and burden to country people. But regrettably that is not something that anyone can really do anything about. Senator BROWNHILL —My question is addressed to the Minister representing the Minister for Primary Industry. As it appears from newspaper reports, Mr Kerin was a reluctant participant in the weekend farm public relations exercise because `it sets a precedent and raises expectations that cannot be met'. Does the Minister agree with the suggestion at that meeting that farmers' employees' accommodation may be exempted from fringe benefits tax or was the excursion just what it was purported to be-a public relations exercise? Senator WALSH —If any farmer wants to gain exemption from fringe benefits tax, like every other employer, he can do it by the simple expedient of charging the market rental and, in this case, increasing the wages to cover it. But that is no problem. What I really want to take up is Senator Brownhill's reference to raising expectations which cannot be met. That is a perfect description of what the Leader of the Opposition has been doing to the farmers and to just about every other group in the community that one can think of. Two weeks ago the shadow Ministry's rural policy-which Senator Chaney later said was a Clayton's policy and not a policy at all because it was something that had no status and had not been endorsed; but anyway for the present purposes I will call the Opposition's rural policy-was leaked. It showed promises totalling more than $500m in additional expenditure for the agricultural sector alone. Of course, when I referred to that in the Senate, Senator Chaney said `But that is not the Opposition's policy at all; that is just a draft', implying that the Opposition is not committed to anything that is in it. I invited Senator Chaney then and I invite him again and also Mr Sinclair, Mr Hunt and Mr Howard, to specify which of the specific items in that shopping list of political goodies which totals more than $500m, the Opposition is repudiating and which the Opposition is just putting out not because it intends to do anything about it but because it is in the business of raising expectations not only which cannot be met but which it has absolutely no intention of attempting to meet. Senator ZAKHAROV —My question is directed to the Minister representing the Minister for Employment and Industrial Relations. How many youth access centres have been launched in Commonwealth Employment Service offices and what is the role of those centres? Can the Minister indicate how many young people are making use of youth access centres? Senator WALSH —I am advised that some 34 youth access centres have been officially launched on a trial basis in CES offices and that a further three centres will be opened in the near future. The proposition was nationally launched by my colleague and good friend Mr Willis on 6 February last. The role of youth access centres is to provide young people with separate and specialised advice and counselling on careers and training opportunities, educational opportunities and income support options available to them, as well as access to employment services generally. Early indications are that the centres are receiving widespread support and usage. At the end of March 1986 some 14,000 clients had used the services of the 34 existing centres, many of which were opened only in early February. The note that I have on this subject might be somewhat dated. If the figures which I have given need revision, I will supply that information later to Senator Zakharov. Senator Chaney —Mr President, I ask the Minister to table the document from which he has quoted. The PRESIDENT —Is the Minister prepared to table the document? Senator WALSH —Yes. Senator SHEIL —My question is directed to the Minister representing the Attorney-General. Since the time that His Honour Mr Justice Lionel Murphy stood down from the High Court of Australia nearly two years ago, how many of his staff have been retained? What work have they been doing? Have any of them been transferred to other duties? If so, what duties and from where are they being paid? Senator GARETH EVANS —I will refer that question to the Attorney-General and seek his response. Senator VALLENTINE —My question is addressed to the Minister representing the Minister for Defence and relates to his answer to my question on 17 April on the comprehensive test ban treaty and the strategic defence initiative. Has the Minister seen the report on the front page of the New York Times of 21 April 1986 which quoted senior officials at the Los Alamos National Laboratories in the United States of America as saying that, whereas six underground nuclear tests were usually required for developing a new weapon, new designs for the third generation of nuclear weapons and the strategic defence initiative could require 100 or 200 explosions? How does the Australian Government propose to press the Reagan Administration for a comprehensive test ban treaty in light of this commitment to continue with such a huge test program well into the next decade? Finally, can he tell the Senate how the Government reconciles its commitment to a comprehensive test ban treaty and its alleged influence with the United States Government with the comment made by Jenni Hewett in the Sydney Morning Herald on 31 May 1986 that `on issues like arms control and negotiating a comprehensive test ban, the United States politely listens to, and then ignores what Australia says'? Senator GARETH EVANS —As Senator Vallentine ought to know by now, disarmament matters are more properly addressed to the Minister for Foreign Affairs. It is in the capacity of representing him that I respond to her. I have seen the two media reports to which Senator Vallentine referred. As I indicated in my answer to her question on 17 April, there clearly is a difference between Australia and the United States on the question of a comprehensive test ban and in regard to the appropriate context in which such a treaty could be concluded. None of the points that have been raised by Senator Vallentine will prevent the Australian Government from presenting its views on a comprehensive test ban treaty to the United States as vigorously as possible. A team of Australian officials is in fact in Washington this week for arms control consultations which will cover this issue. Senator WALTERS —I direct my question to the Minister representing the Minister for Employment and Industrial Relations, Senator Button. The PRESIDENT —Order! It is Senator Walsh. Senator WALTERS —The Minister will be aware of the report given wide publicity in the media on the day the Builders Labourers Federation was deregistered that $1.5m was withdrawn from the union's bank in Melbourne. I am reliably informed that assets of the BLF in New South Wales, Victoria and the Australian Capital Territory total approximately $10m. Will the Minister inform the Senate what steps the Government is taking to ensure that these funds are returned to the persons who were financial members of the union at the time the union was deregistered and not used by the members of the Executive of the BLF for their own benefit or to fund industrial disputes within other unions and within industry generally, to the detriment of the Australian work force and its employers? Senator WALSH —Senator Walters originally referred this question to Senator Button. If it had been 18 months or so earlier, she would have been correct in so doing. If her perceptions of the world are 18 months behind what is actually happening in the world, I suppose that puts her a long way in front of most of her colleagues. On the substance of the question, as I understand the situation-I will check it with Mr Willis-the Commonwealth Government has absolutely no power over the funds of the BLF in New South Wales or Victoria because there are State registered organisations there and the funds are held by the State organisations and, therefore, only the State governments are able to direct or influence what might happen to them. I also have a vague recollection of one or both of those State governments having made a statement that they would be watching the position. I believe that Mr Willis or some other responsible person in the Commonwealth Government has made a similar statement in regard to the Australian Capital Territory branch of the Builders Labourers Federation which is under Commonwealth control. I will check that out to see whether I am correct in believing that a statement was issued some time ago, and also get any additional information which is available. Senator CROWLEY —Has the Minister representing the Minister for Health seen the article in the Age on 2 May 1986 headed `Australia and US neck-and-neck in race to develop unisex pill'? It describes the close contest between companies in Australia and the United States to produce a hormone called inhibin? As this contest centres on patents for the various stages of the research and could mean enormous financial gains to the country which wins, does the Minister agree with the assessment by Dr Neil Willets of Biotechnology Australia that Australia is in `a good patent position'? Can he say what is the current state of play in this research contest? Senator GRIMES —Yes, I did read the article. The cloning of the hormone inhibin has been the aim of many research organisations in the world for a long time. In recent months the large United States company Genentech managed to clone pig inhibin. Soon after, Biotechnology Australia plus Prince Henry's Hospital, Monash University and St Vincent's Institute of Medical Research in Melbourne managed to clone inhibin from a bull. I suppose, as is well known, that as pigs are closer than bulls to human beings Genentech might be said to be ahead. In fact, that is not so; the hormones are almost identical. These hormones must now be tested and developed. I can assure any of my more athletic colleagues in the place that they need not rush out to look for inhibin as it will not be on the market for about 10 years. I suppose some of my colleagues might get in on the research into this drug in less time that that. What happens now is that the battle will go on between I suppose Genentech and Biotechnology Australia as to who can get the patent first and who can get the patent registered in most countries. As Senator Crowley said, Dr Willets has been working in this area for a long time. I suppose this fact is reflected in his language when he said to the Age: We hope this will give us a good patent position . . . how it will in the end stack up against the Genentech patents remain to be seen. Dr Willets has made the fairly sensible suggestion that it may be a good idea if Genentech and Biotechnology Australia combined their considerable research and development talents to introduce such a unisex pill which would be potentially of great advantage in a rapidly overpopulated world. Inhibin, in fact, inhibits the production of ova in females and spermatozoa in males and seems to do so without suppressing libido. I know many people in the world would like to be in a position to use such substances, but as I said, it will take about 10 years, so they need not join the queue. Senator VANSTONE —I direct my question to the Leader of the Government in the Senate. In light of comments made today by the Minister for Finance referring to the improper raising of expectations by an Opposition draft policy document, does the Government agree that the Priority One: Young Australia program and in particular the Australian traineeship scheme has improperly raised the expectation of young Australians given that the target of 10,000 traineeships will not be reached? In fact on the mainland there are only just over 1,000 traineeships in place with only 52 in the private sector. Given the announcement in September 1985 of 500 traineeships with Ansett Airlines of Australia, none of which are in place nine months later, will the Minister tell the Senate what has gone wrong and whether the Government agrees that this announcement unfairly raised the expectations of young Australians? Senator BUTTON —I am not responsible in any way for what Ansett might have said at one stage or another. People can draw their own conclusions about whether anticipations were raised or not. The honourable senator asked of me as Minister whether the Priority One program improperly raised expectations. Certainly, the Government is disappointed with the progress of the Priority One traineeships. However, we are working away at them and I think we will get better results than are currently expected. I hope for that. Senator BUTTON —Earlier today during Question Time Senator Chaney asked me a question about the fringe benefits tax and statements made by the Prime Minister. I can perhaps advance the information on this matter a little further by saying that the Prime Minister in a Press conference today was asked about this matter. I quote from the transcript of that Press conference. The Prime Minister said: Well I had raised with me specifically the question of the impact of the fringe benefits tax for employees. I just want to look at that and get some information about the degree of impact and Peter knows I've not promised anything on that. I just want to inform myself on the dimension of it. They- that is, the farmers- are making the point that if they've got no income they're not paying any tax otherwise, and yet get hit with this tax. They regard that as an anomaly and a problem. I certainly want to have a look at that. They have certainly placed some stress on that. I am advised that it has been said that they can carry the payment forward as a credit against future tax liability. I think that was said in the House of Representatives today. That is the context in which I answered the question before and I think it is quite consistent. Senator CHANEY(Western Australian-Leader of the Opposition) —I move: That the Senate take note of the paper. I seek leave to continue my remarks later. Leave granted; debate adjourned. Senator MASON(New South Wales) —by leave-Having recently visited all three countries discussed in the statement made by the Prime Minister (Mr Hawke)-that is, China, Japan and the Philippines-I would agree with the importance of visits to them by an Australian Prime Minister. At the outset, I would like to mention briefly the extraordinary nature of the presentation of business in this place in that this statement, which is a ministerial statement by no less a person than the Prime Minister, has been brought down as a paper. There is an increasing tendency on the part of the Government to deal with matters in this way and I think that this is regrettable. This statement, which is of considerable importance sets out the Prime Minister's impression of perhaps three of the most important countries with which we have to deal. It ought to be debated reasonably and properly and should not be subject to the very considerable constraints which are applied in regard to debate on papers. I just bring that to the Government's attention. I will deal with the Philippines first. I believe that Australia has a major responsibility to assist the Aquino Government through the post-Marcos stage. This will not be easy. The levels of support for the communist New People's Army in many regions of the Philippines represent a major problem. As always, of course, the communist insurgent movement thrives on basic economic deprivation of the people. We see here a lesson which apparently the Western world has found itself incapable of learning over a period of 40 years, having put forward fallacious ideas like domino theories and things of that kind. Nations are not dominoes to fall over one after another; they are groups and assemblies of human beings and they will respond to events as human beings normally will. It is a fact that if people are grossly suppressed by a governing clique to the extent of serious economic deprivation of those people, they will look for an alternative. They looked for an alternative in China and Indo-China and we lost those countries because of our failure to perceive that. Too often an alliance between the traditionally land rich families and the military forces in the Philippines has suppressed the villagers, the people of the barrios, into a state of virtual serfdom to these vested interests. If that is considered an overstatement, let us look back at the publicity during the persecution of Father Brian Gore by the Philippines military. The situation in the Philippines is quite as bad as it was in the years before the communist takeover in China and in those other countries we have lost. The way to reduce and remove the influence of the New People's Army is to address those problems. If the Australian Government can persuade Mrs Aquino to embark on a genuine program of land reform and removal of the regional power of the military units and can assist her materially in these things, I believe we will be doing something of vast importance, but it will not happen if the rest of the world just stands by and watches. I suspect that those problems may well be too big for Mrs Aquino to tackle alone, and that is not intended as a criticism of her. It is apparent from what the Prime Minister said in his statement about the Philippines that he sees some of these problems. The 50 per cent increase in our aid and the visit of an aid team to see what we can do further are good steps in the right direction. Australians, on the whole, are popular in the Philippines. We have a great opportunity there in that most Filipinos speak English. Maybe Australians should be looking at a far larger movement of people as advisers and project officers to the Philippines to assist this process of social and economic reform, something more or less along the lines of the Peace Corps projects of the past; and I particularly think of the Australian Volunteers Abroad program. This is an opportunity perhaps for some of our unemployed young people who are qualified as teachers and other things to carry out social revolution, in the best sense of the word, in a part of Asia which will be of vital importance to us in the future. I commend that possibility. There is a need for people-not just for money to be thrown at things with some sense of dedication and purpose to go there. I think that would be of enormous value. I hope that we have learnt from China and Japan. On page 2 of the Prime Minister's statement he pointed to the importance of tourism between Australia and Japan. That is fine, but will he see to it that the long-standing shortage of passenger aircraft between the two countries is remedied so that people who want to go backwards and forwards between Australia and Japan will not be hampered by artificial constraints of that kind? The Prime Minister might also learn from the Japanese attitude towards business and national objectives. The Japanese know that it is a tough, competitive world. They are now making a major and courageous advance into new technology, with a group of regional centres they call technopolies, which will throw Japan directly into the late twentieth century with the most wide ranging set of new proposals I have seen. This is being done by the Japanese Government providing leadership and finance. The Japanese Government realises, as this Government does not, that government has the responsibility to be a cutting edge, to be a leader in this area of new technology. Senator SIBRAA(New South Wales) —I seek leave to make a brief statement on the same subject. The DEPUTY PRESIDENT —Leave is granted, but I think it would be appropriate if statements were limited to five minutes, as Senator Mason limited his statement. Senator SIBRAA —I will limit my contribution to five minutes. I welcome the statement by the Prime Minister (Mr Hawke) and I will confine my remarks to the People's Republic of China. Gough Whitlam said in his book The Whitlam Government 1972-1975 that the essence of a sound foreign policy was the intelligent anticipation of change. That statement was used again recently by the Minister for Foreign Affairs (Mr Hayden) when he made a foreign policy statement to the Parliament. Whitlam gave a number of examples in his book of the intelligent anticipation of change, but the most striking example was that of China. Whitlam advocated recognition of the People's Republic of China when the Australian Labor Party was in opposition. He put the policy into effect when we won government and the Chinese have not forgotten that our policy was not popular in Australia at the time. The then Prime Minister McMahon and other conservatives in Australia ridiculed Mr Whitlam and the ALP. In fact, it was President Nixon who pulled the rug out from under McMahon and the tories. Kissinger was in Beijing at the same time as Gough Whitlam, Mick Young and the Australian Labor Party delegation were there in 1972. That United States action assisted Whitlam and the Labor Party to win government. It removed foreign policy as an election issue. I believe it gave the Labor Party an issue with which to run during the campaign. Whitlam also gave other examples of the intelligent anticipation of change-Papua New Guinea and southern Africa-and history has also proved that the policies were correct in that regard. But our policies in regard to China and our relationship with China have had a lasting effect. They have led to the excellent relations that exist between Australia and China today. The Prime Minister said in his statement: In opening our discussions Premier Zhao Ziyang said that China attached very great significance to building the relationship with Australia and to realising the full potential of our relationship. China's seriousness about this, which my Government fully reciprocates, was reflected in the exceptional opportunities provided for intensive discussions throughout the visit. The Prime Minister then listed the people to whom he was able to speak. He had access to the Chinese leadership at all levels. This morning I received another example of the building of the relationship between Australia and China. During the recent visit by a delegation from the National People's Congress, discussions were held between that delegation and the Joint Committee on Foreign Affairs and Defence, of which I am Chairman. Members of the Chinese delegation were keen for our Committee to exchange views with the Foreign Affairs Committee of the National People's Congress and have invited a delegation from the Committee to visit China and possibly take part in the National Day celebrations. I am hopeful that some Committee members can use their travel allowance and accept the invitation. When the Chinese delegation visited Canberra recently, it informed me that the parliamentary delegation, led by the President, Senator Douglas McClelland, and which also included Senator Jones, Senator Sheil and Senator Mason, was one of the best parliamentary delegations ever to visit China from any country. During the Prime Minister's visit a number of priorities were discussed, including the economic modernisation that is taking place in China today and how important it is that these new opportunities will be available to Australia. I think it is interesting to note that during the Prime Minister's visit a number of Australian businessmen were in China looking at those opportunities. There were discussions on the steel negotiations, transport co-operation-including a number of port projects-and on regional and global issues that affect both countries. I agree with the Prime Minister when, in his statement, he said: To sum up, I am confident that Australia and China are well on the way to constructing a strong and well-rounded relationship covering commerce, foreign policy dialogue and co-operation, and cultural exchange in the broadest sense. Much has been done, the potential exists to do more, and I sought, I believe successfully, to provide impetus to each of these areas through the visit. Senator COOK(Western Australia) —by leave-The Senate is discussing a report to the Parliament by the Prime Minister (Mr Hawke) upon his visit to Japan, China and the Philippines, a visit which ended on 29 May last. Both Senator Mason and Senator Sibraa remarked that those three countries are critical countries in this sphere of the world for Australia, both in strategic regional terms and in trade terms. The visit by the Prime Minister, who spent not a fleeting but a valuable amount of time in those three countries, discussing those issues, was an important event for Australia and this Parliament. I do not want to spend a lot of time talking about Japan or the Philippines. But I do say this about Japan: It is our most important trading partner and, so soon after the Tokyo summit, it was vital that the Prime Minister speak to the Prime Minister of Japan about developments at that summit and, in anticipation of the new round of talks on the General Agreement on Tariffs and Trade which will commence in September-in particular, as a consequence of that round of talks-to put Australia's view about loosening barriers to trade internationally. The statement indicates that some progress was made on that. As well, it indicates that approval in principal was achieved for missions dealing with investment, both in Australia and Japan, to visit each of those two countries and it also notes that barriers to increased tourism from Japan to Australia are on the way to being removed. I believe that this is an important development in the trade area. Indeed, with Europe becoming increasingly an unattractive destination for tourists, Australia is ideally situated to pick up a lot of trade from both North America and Japan. It is pleasing to see that the Prime Minister was able to press our special position in that regard on this mission. I wish to address my substantive remarks to the position of China. As Senator Sibraa has said, the Whitlam Government was responsible for easing and then opening relations between Australia and China in the contemporary period. Two years ago the Prime Minister, on his first visit to China as Prime Minister of Australia, was able to set in train a number of important and vital commercial and developmental negotiations between our two countries. Talks that he conducted then were encapsulated in the formation of the Australia-China action plan, which is a plan to develop trade ties between the two countries and which is vital to Australia's trading performance. Also it is a plan which is making progress. Part of that plan is to integrate the steel industries of China and Australia. As a Western Australian senator, it is particularly pleasing for me to see that talks about the reopening of the Kwinana steel works and the possibility of the development of a mine at Mount Channar in the Pilbara region of Western Australia came in for special discussions between the two governments. Page 6 of the statement notes that, while both governments regard those negotiations as being the responsibility of the enterprises directly concerned, nonetheless those governments are committed to providing a framework in which those talks can reach a successful conclusion. Jobs in the steel and mining industries in Australia depend on it. In fact, our longer term development projects require that we develop a much stronger trade relationship with China. It is pleasing to see a reference in the statement to the fact that the Chinese Government has renounced atmospheric nuclear testing and has affirmed its willingness to participate in negotiations for a comprehensive test ban treaty and to support the protocols to a treaty to establish the South Pacific nuclear free zone. This shows that we can find accommodation not only on the trade front, but also on other fronts, with this country to the north consisting of more than one billion people. As China grows its levels of national growth will outstrip ours and our accommodation with that country in terms of our economic performance is vital to our development as well. Senator VIGOR(South Australia) —by leave-I wish to raise a few matters arising from this statement by the Prime Minister (Mr Hawke) which relate to our trade with the three countries concerned-Japan, China and the Philippines. With the current problems of our rural and mineral industries, it is extremely important that the highest level delegations, such as those carried out by the Prime Minister, should discuss these matters in great detail, particularly in the light of the fact that we are currently in the midst of an economic war that is raging between Japan and the United States of America. That war has been raging for at least a couple of years. It is very heartening to see on the first page of the statement that Japanese leaders have assured the Prime Minister of their support for the proposition that agriculture should have a prominent place in the new round of Multilateral Trade Negotiations and that he was told that Japan stood ready to work with Australia to achieve this. It is quite exciting that Mr Nakasone, the Japanese Prime Minister, apparently undertook that Japan would not do bilateral deals with third parties at Australia's expense in the area of coal and other minerals. It is very important that we should be developing steps throughout the world for Australia to join with other developing nations to exert joint pressure in negotiating new trade agreements and new trade terms with the very large and powerful trading nations such as Japan. It is extremely important that in these negotiations we fix minimum prices for raw commodities to give a fair return to producers in each of the countries concerned for the work that they put into these raw commodities. However, it is extremely important also that we should adapt our industry so that the products we process are not just primary produce or raw materials but also products with much more value added. It is very important that we should do more processing in Australia, and it is heartening to see that the arrangements with the Chinese involve the export of more processed products from Australia, although Japan is still talking about us mainly as a purveyor of raw materials. It is also very important on the world market that we tie interest payments on overseas debts to the current world commodity price. I am surprised and a bit disappointed that the Prime Minister has not raised this issue anywhere in his statement, because unless we can get a reasonable tie-up between the financing operations of international trade and the pricing agreements we will have problems. I think it is important also that the Prime Minister has reaffirmed in his statement the principles of fair trade which are embodied in the General Agreement on Tariffs and Trade. We should continue making the point that these agreements are being basically flouted by the United States of America, the European Economic Community and, in some cases, Japan. It is enormously important that we should push this principle. Finally, I ask: What firm assurances did the Prime Minister obtain from Japan about decreased protectionism, particularly in relation to our agricultural products? Our farmers are under a great degree of strain, particularly in the beef industry. Senator SIDDONS(Victoria) —by leave-I wish briefly to comment on the importance of Chinese-Australian trade relations. I was delighted to see that the Prime Minister (Mr Hawke) has concentrated on this. I visited China some years ago and was amazed to learn at first hand how highly regarded Australia is. In fact, in some quarters Australia-Chinese relationships were considered to be more important than Chinese relationships with Europe. It is a fact that Gough Whitlam visited China ahead of Richard Nixon. And it is a fact that the Chinese have not forgotten that and hold Australia in very high regard. As chairman of a company in the light engineering area, I had the honour a few weeks ago to receive a very high level delegation from China, which included the Panchen Lama and various governors of provinces in China. I was amazed to learn just how anxious this Chinese delegation was to establish trade connections with Australian industry, particularly the light engineering industry. I re-emphasise the opportunity that exists for Australian industry-I suggest on a province by province basis, because that essentially is the way the Chinese parliamentary system works-to have direct contact with China. I think there is enormous opportunity for development of engineering associations between China and Australia. It is very encouraging to learn from the Prime Minister's statement on his visit to Japan, China and the Philippines that he is challenging Australian industry to develop the extraordinarily high regard in which this country is held in China. It is regarded as important in the industrial area. There is no doubt in my mind that, once China develops its manufacturing capacity in line with the expertise of Western manufacturing countries, it will have the opportunity to become the country of the twenty-first century. It has enormous potential. Australia should not miss the opportunity to be associated with the industrial development that will undoubtedly take place. Senator GILES(Western Australia)(3.31) —I move: That the Senate take note of the paper. The Advisory Council for Inter-government Relations, in the course of its report entitled `Intergovernmental Aspects of the Provisions of Post-arrival Services for Immigrants', has thrown some useful light on the role of local government in the delivery of services to immigrants. It has provided us with the information that throughout Australia there are 106 local government authorities with an overseas-born population in excess of 5,000 or 20.6 per cent of the total resident population. Of these, 35 are in New South Wales, 43 in Victoria, 12 in South Australia, and 16 in my State of Western Australia. It is quite clear that the expectations of local government have increased quite significantly over the last few years with regard to the provision of community support services which are more appropriately planned and delivered within particular geographic locations. Examples of these are child care services and the provision of services for the aged. Of course, there is considerable dependency upon the Commonwealth and the States for the funding necessary to provide these services. Advisory Council for Inter-Government Relations Advisory Council for Inter-Government Relations Advisory Council for Inter-Government Relations Advisory Council for Inter-Government Relations As a result of a survey carried out for the purposes of this report it was shown that, as with all community services, it was extremely difficult for migrants to obtain reliable information. This survey of 12 local government authorities-a good sample from all States and all sizes of authorities-was able to enumerate the range of services provided by those 12 authorities. In this survey, Fremantle City Council in Western Australia was shown as providing a range of 21 human services as against a lower count of 10 provided by rural authorities. As a result of the limitations identified in this survey the Advisory Council for Inter-government Relations has made recommendations which I believe should receive a great deal of serious consideration from both the Commonwealth Government and the local government authorities that the report addressed. The Commonwealth should provide funds through the grants-in-aid scheme, which currently is not accessible to local government authorities. In addition, within each State, local government associations, in association with ethnic affairs commissions, should attempt to establish a task group to improve access for immigrants to local government community services such as child care and domiciliary care and, more importantly still, to sensitise individual local government authorities to the importance of being fully aware of the need to provide the services required by a multicultural society. I think we should congratulate those few local government authorities which have taken this part of their responsibilities very seriously, and commend to other local government authorities a very serious consideration of the recommendations in this report. Senator VIGOR(South Australia)(3.35) —One of the many areas in which the three tiers of government and also voluntary organisations in the private sector actually provide services together and co-operate reasonably effectively is the handling of immigrants and the handling of the responsibility of dealing with people of many different nationalities. I commend the Advisory Council for Inter-government relations for its report entitled `Intergovernmental Aspects of the Provision of Post-arrival Services for Immigrants', which draws together a whole lot of strands in this area and draws attention to some of the problems caused by lack of co-ordination and the duplication of services between various levels of government. It is a familiar story that each level of bureau- cracy will just carry on its merry way with little attention being given to the others. This is particularly true at the Commonwealth level. In the very short time that I have available I would like to point out that a lot of measures taken in this area at the Commonwealth level are very short term measures. Because of this action the problems of migrants are suddenly off-loaded upon both the States and local government, which have to adapt their programs very rapidly to fit in. The States have taken on a mainly co-ordinating role in this area through their ethnic affairs commissions. The ACIR suggests that interpreter and translation services should be streamlined to give greater access in high demand areas such as health and education. The DEPUTY PRESIDENT —Order! The time allotted for the consideration of Government papers has expired. Senator VIGOR(South Australia) —by leave-I move: That the Senate take note of the paper. I seek leave to continue my remarks later. Leave granted; debate adjourned. Senator VIGOR(South Australia) —by leave-I move: That the Senate take note of the paper. I seek leave to continue my remarks later. Leave granted; debate adjourned. Motion (by Senator Archer) agreed to: That leave be given to introduce a Bill for an Act relating to the payment of commercial accounts payable by the Commonwealth or by an authority of the Commonwealth. Bill presented by Senator Archer, and read a first time. Senator ARCHER(Tasmania)(3.39) —by leave-I move: That the Bill be now read a second time. I seek leave to have the second reading speech incorporated in Hansard. Leave granted. The speech read as follows- Today I present a private member's Bill for an Act relating to the payment of commercial accounts payable by the Commonwealth or by an authority of the Commonwealth, of which the short title will be Prompt Payment of Commonwealth Accounts Act 1986. I am pleased to say that the Opposition parties have agreed to support me on this Bill. This Bill has become necessary because governments at all levels now occupy such an important place in the market that the business community, particularly small business, is providing many services to government. This is highlighted by the fact that in 1950 governments of Australia consumed 15 per cent of gross domestic product whereas today the figure is 45 per cent. These figures indicate the extent to which government has increased its financial dealings with Australian business. In difficult economic conditions, prompt payment of accounts is crucial to maintaining viability of business. Any small businessman would tell us how important the cash flow is to the success, and often survival, of his business. When cash flows are interrupted by delays from payment of government accounts, other creditors are not sympathetic. The situation becomes both serious and ludicrous when the creditor is that same government which is slow to pay. As government continues to expand its activities into the community with such examples as Medicare and the supply of medicines, the ever-increasing sectors of business and professions are becoming substantially reliant for their income on government payments. It is essential to guarantee that they are paid promptly. The coalition does not believe that the business sector should be involved in providing an extravagant government with interest-free loans by way of extended terms of credit. There is mounting evidence, as this Government gets further into the financial mess of its own creation, coming from business, and particularly the small business sector, of ever-increasing delays in payment of government debts to its creditors therefore causing business to become the unpaid bankers to government. Government is very demanding of the taxpayers and its debtors, as anyone who has had dealings with the Australian Taxation Office, Australia Post, Telecom Australia or the Australian Customs Service will tell you. Not only does it require payment immediately but it invokes heavy statutory penalties in pursuing outstanding amounts. To take but one example, the Commissioner of Taxation, the Government's principal credit manager, is now equipped with a massive armoury of penalties for late payment of even a few days. He can add 20 per cent interest to both the outstanding amount and the penalty. Because of this I, on behalf of the Opposition parties, have prepared this legislation as a major step in overcoming this present unacceptable situation. In stark contrast, the Federal Government has a well-deserved reputation as an and extraordinary tardy payer of its outstanding accounts. Just how bad this situation has become is apparent from the hundreds of representations made to my office since I gave notice in early 1985 of my intention to introduce a Bill to provide for the prompt payment of commercial accounts by the Commonwealth and its statutory authorities. The reasons are numerous and include inefficiency and a sometimes callous disregard by public servants of the cash flow problems of Australian business. No doubt one of the principal reasons is the dramatic overspending inherent in Keating Budgets which has increased the Federal Government's indebtedness by $20,000m and has seen interest charges to the Commonwealth double to almost $7,000m and in that process move from the fifth highest to the second highest direct expenditure item in the Budget. Clearly there is now good reason for the Government to wish to gain interest free credit from its creditors. The fact that a private member has to introduce a Bill to provide for prompt payment of commercial accounts by the Government and its statutory authorities is an indictment of this Government. Despite its rhetoric of concern for the problems facing the business community this Government, which is daily faced with the evidence of hardship suffered by honest, hard-working men and women imposed by the very late payment of moneys owed to them by the Federal Government, has done nothing to correct this situation. For this reason, we in the Opposition have taken the initiative to develop a practical and effective solution. Faced with a similar problem, but one of a far larger scale, President Reagan introduced in 1982, and subsequently received Congressional support for, legislation to ensure the prompt payment of United States federal agencies commercial accounts. The Prompt Payment Act, Public Law 97-117, which came into force in 1983, requires federal agencies to pay their bills on time or pay interest penalties on late payments. The executive office of the President, the Office of Management and Budget, reports that prior to the passage of the Act as much as 30 per cent of government bills were paid late. In fact, in 1983 and 1984 financial years, federal agencies made more than 99 per cent of their payments for goods and services on time; that is, of course, after the introduction of that legislation. Two-thirds of the remaining figure is the responsibility of the United States Defence Department which, because of the special nature of its procurement processes, is a chronically late payer. The United States legislation was based on these premises: It would result in timely payment; better business relationships with suppliers; improved competition for federal acquisitions; and reduced cost to government. I think that particular statement is worth repeating: Reduced cost to government. Quite clearly, business that has the experience of being required to wait a long time for its money makes adjustments in the prices that it is prepared to offer to government and the taxpayer becomes the final person to pay in that regard. I now turn to the individual clauses in this Bill. Briefly, the Bill provides for the Government to pay its commercial accounts on the 25th of the month following invoice or pay interest on the amounts outstanding. Clause 1 deals with the short title of the Bill and clause 2 covers the interpretation of terms used. This clearly defines those bodies which are covered under this legislation and provides a clear definition of a commercial account, due date and enactment, et cetera. Clause 3 deals with the extension of the Act to external Territories. This Bill is to apply to all Commonwealth of Australia departments, statutory authorities and administrations in the external Territories. Clause 4 covers the duty of the Commonwealth to pay each commercial account that falls due in one month on or before the 25th of the next following month. This will allow those taxpayers owed money to be paid and receive any moneys prior to the end of the month. Clause 5 enacts the payment of interest by the Commonwealth on overdue accounts. This clause becomes effective when the Commonwealth fails to pay a commercial account on or before the due date in respect of that account. If this occurs, the Commonwealth is liable, by virtue of this Act, to pay in addition to the amount due, interest on the amount so due, whether it is all or part of the original account. The rate of interest that will be charged is that rate at the time ordinarily charged by the Commonwealth Bank of Australia in respect of loans in excess of $100,000. The point I make there is that the Government is generally able to borrow money at a lower rate than that particular cost. But of course the businessman-creditor is not able to borrow money at a cheaper rate than that and under these arrangements there will be no profit to the businessman; there will be a penalty to government that is tardy in paying its accounts. There will be no profit to the businessman, it will only offset the interest costs he is bound to incur as a result of having to borrow money to pay his other creditors when he is unpaid by government. All interest penalties will be paid at the same time as the account is paid. Clause 5 (3) deals with litigation and arbitration and it clearly points out that where the Commonwealth or the Government chooses to contest a cost, a charge, levied upon it and there follows litigation, the interest will be payable by the Commonwealth on the arbitrated amount. If there is a settlement in favour of the business person concerned or the business concerned, that settlement will attract interest for the period of time that it has been outstanding from the date on which the amount was first claimed. This, of course, has another effect and that effect is to ensure that public servants and others do not use the course of litigation to delay payment deliberately because if they do so, and they are unsuccessful or even partially unsuccessful, they will have to pay interest on the amount so settled. At this point I feel it is appropriate to quote from a letter I received from a small businessman in Queensland who has written to me concerning this Bill. He says: On the subject of penalties for late payment, we feel that your proposed Act does not present a severe enough deterrent for the public servants. In addition, it is totally inconsistent when viewed in the light of the Income Assessment Act. In other words, the rules of the tax man. He continues: As an initial point, this Act demands payment of group tax payments by private industry employers by the 7th day of each month. There he is comparing it with the 25th day recorded in this legislation. He goes on: Some latitude then appears to be allowed on this requirement up to approximately the 16th day of each month after which the penalty applies. Penalties are then calculated at the rate of 20 per cent per annum. He continues: We therefore submit that requirement deemed necessary for private industry, should therefore form the basis of the minimum requirement necessary to apply to the public servants. Clause 6 determines the date on which a commercial account falls due. This can occur when an agreement is reached by the provider of the goods and services with the Commonwealth and in such cases the account will become payable in accordance with the provisions of that agreement. In all other cases, the account will fall due for payment on the day on which a request, in writing, for payment of that amount is received by the Commonwealth from the provider of those goods or services. Clause 7 clearly indicates the actual time when payment is deemed to have been made. If an account is paid by prepaid post, the day on which a cheque or bill of exchange, et cetera, is posted to the person entitled to payment at the last known address is the date on which that account is deemed to have been paid, or, in any other case, on the day on which the amount or cheque or bill of exchange for the amount is delivered to the person or paid as directed by that person. This is certainly more positive than a statement in a recent government tender document which said that the payment is `deemed to have been made when the cheque has been drawn'. I would not like to have to be doing business in that regard and be told that I have been paid because my debtor has, in fact, drawn the cheque. This particular requirement in my legislation certainly clears up that position. Clause 8 deals with the moneys to cover any interest penalties incurred by the Commonwealth in the late payment of its taxpayers accounts. Any additional amounts added to the original account for interest penalties are considered as part of the original account and therefore must be paid out of moneys appropriated by the Parliament to the relative department, authority or external Territory for the purpose. Authority is also given in this clause for any moneys appropriated by the Parliament for the purpose of the provision of goods or services to the Commonwealth authorities or external Territories to be deemed to be legally available for the payment of interest penalties incurred. This clause has the double effect of making this private member's Bill constitutional as it does not commit the Government to extra expenditure and placing the interest penalty firmly on the respective departmental budget. Late payers will consequently suffer reduced expenditure capacity in other areas. I am sure that may be just the incentive that many departments need to be more prompt in their payment to their creditors. Clause 9 allows for the Commonwealth to receive discounts for prompt payment of its accounts. It will be the duty of the Commonwealth, in calling tenders for the provision of goods and services, to seek to obtain a discount for payment of commercial accounts related to the provision of those goods or services before the due dates in respect of those accounts. There are certain circumstances when the cost to a tenderer of short term financing of costly goods sold to government can substantially exceed the equivalent cost to government and must be included in the tendered price. Clearly the taxpayer should be protected from such additional cost incurred purely to accommodate a lazy public sector. It is not that long ago that a public servant advised a seminar that business should not make offers relating to better discounts for prompt payment as it was just too difficult for them to handle. Quite obviously that is a cost to the taxpayer and should not occur. Clause 10 is the transitional clause of this Bill. It provides that the Act apply to commercial accounts in respect of goods and services provided to the Commonwealth before or after the commencement of this Act, other than those accounts which have been paid in full including those commercial accounts that fall due for payment before, but not yet paid before, the commencement date of this Act. I know that Government members will introduce all sorts of reasons for the defeat of this very important initiative for business, particularly small business. I am hopeful that the first Government speaker I see listed, the honourable member for Eden-Monaro (Mr Snow), will be prepared to state the genuine case as it relates to the pharmacy industry which, as we all know, has been one of the major providers of interest free funds to the Government. I will be interested to hear his comments; nevertheless, I am expecting to hear such words as: `Well, governments run to strict budgets; clearly, they do pay on time; departments must be accountable for the public purse expenditure; there are strict processes to be adhered to when dealing with the taxpayers' money; all this is too hard to implement'. The Government has become too inflexible in its accounts paying process and it is time that it is forced to make allowance for the prompt payment of its accounts and not continue to offer excuses all the time. On many occasions approval for payment must be given by persons not connected with the realities of business or accounting. Conscientious clerical workers often are unable to receive approvals from paper-shy `other occupation' staff. An example given to me from members of the consulting engineering profession was that they often had very sympathetic accounts staff prepared to pay them but those same accounts staff could not get other engineers employed by government who did not like that sort of work to give the necessary approvals for payment of the account. Some of the excuses used by government departments for late payment of their accounts would be comical if they were not true. The business sector has provided us with a list of the excuses. For instance, some departments claim they have never received the account. There is always the good old answer: `The cheque is in the mail'. Authorising officers are unfortunately on recreation leave, on sick leave, having a flexi-day off, et cetera, or just plain out. The excuse is given that the account is somewhere in the internal mail; the computer line is down; or the form was not endorsed or has an incorrect address upon it. If a business man rings up, the telephone is not answered or the person who answers says `This is not my problem, I am just passing through', or, `I am sure I paid that account'. There will be a lot of businessmen listening at the moment who have heard all these responses before. The classic was stated in this Parliament in 1985 when the Minister for Health (Dr Blewett), in answer to a question from the honourable member for Henty (Mrs Child) said that the problems `were due to the change over to the pharmpay system, to repetition strain injuries within that section of the Department and to some industrial troubles'. We are all aware of the problems of repetitive strain injury but that is no help to the people waiting for their payment; it is no excuse for government. The list goes on. This financial year the Federal Government will spend approximately $69,000m or over $1,330m on average every week. Only part of this money goes to trade creditors. But the magnitude of actual money that is returned to the Government for every week's delay in payment of legitimate debts is still clearly substantial. This financial year the Government will have an anticipated deficit of $5,000m. However, government deficits can be manipulated by policy decisions to delay payment and a clear example of this is that the Government cannot at any one time tell anyone how much money it owes to the community by way of outstanding accounts. The cash accounting methods of the administrative government have never listed creditors. This Government expects the business community to do the same, and it is just not good enough. I mentioned earlier in my speech that I had received many letters expressing concern about the late payment of government commercial accounts. I would like to cite a few of these cases so that those opposite can appreciate some of the problems facing those in the outside or real world. First, a small businessman whose debtors include many government departments was three weeks overdue in lodging his group taxation deductions of around $10,000, resulting in a fine of over $400 as a late payment penalty-a rate of nearly 70 per cent per annum. There are many people in the world who would call that usury. Secondly there is the case of a company which sells many products to government departments on 30 days payment terms and generally has to wait between 60 and 90 days for payment. Thirdly, there is the case of this businessman who writes: I had to get a bank overdraft for the first time to cover my cash shortfall which, of course, means I pay interest due for the Government's bill. Fourthly, another businessman writes: At the moment we are right in the middle of tax payment time-and if we are one day late in paying that to the Government, we are liable to cop a 20 per cent penalty. Fifthly, this businessman writes: Of course, if a business such as mine were to reply to the Australian Taxation Office that we were unable to pay PAYE tax or other tax due because we were still awaiting payment for services rendered to the Commonwealth of Australia, the response would be completely unsympathetic and penalties and interest incurred. Is it not totally unjust that the Commonwealth can withhold payment for services rendered for excessive periods without incurring such interest penalties. It seems to me that our country has become rife with laws for `government' and laws for `the people'. Sixthly, there is the case of a pharmacist who is owed $60,000 by the Department of Health-and this was put to me personally-but who had to borrow $20,000 to pay his income tax. Outstandings owed by the Government were, of course, included in his taxable income. So the debts that the Government owed him he was taxed on and then he had to borrow $20,000 to pay that tax. Might I finish these examples with another quotation which I think clearly highlights the problems facing the commercial world: Quite frankly, the whole process of getting payment out of the Government is a nightmare-one hesitates to accept work from the government departments for this reason. This experience is far from unique. The flow on implications in the commercial world of the Government's inability to pay contractors promptly is horrific and if allowed to continue will eventually cause many small businesses to go under, and the whole commercial process to grind to a halt. I have several clients who find it difficult to pay their outstanding accounts from this office, because, and I quote: `the Government is so slow at paying them'. Only legislation will ensure that the Government's accounts are paid on time. This legislation which I present to the Parliament today will oblige governments-future governments as well as present governments-to pay their creditors on time and is vastly different from promises made on this matter by government leaders at various times which, of course, like other promises can be broken. In Victoria, early in September 1985 Premier Cain issued an instruction that government agencies were to make sure their bills were paid on time. He did that in response to the fact that a small company was being liquidated because it could not survive; it was going broke for lack of cash flow. It was discovered that the Government of Victoria owed it $100,000, and Premier Cain was deeply embarrassed. But after saying that, it was reported in the Press in mid-October 1985 that the Department of Conservation, Forests and Lands had hundreds of accounts outstanding from 30 June 1985. So, five or six months after, these accounts were still outstanding and, in fact, those accounts outstanding included failure to pay registration fees for motor vehicles to the Government itself. In late November 1985 a small businessman in Victoria was reported as being owed $12,000 by the Victorian Government-in fact, by V/Line-for over seven months. He was owed $12,000 for seven months. How can anyone run a small business on that basis? So much for instructions and directions! The only answer is legislation and, of course, we have the example of the American legislation being so effective. Literally months after its introduction suddenly the bureaucracy found that it could pay on time. In America 99 per cent of commercial accounts owed by the Federal Government are now paid on time. This Government should support this very worthwhile legislation to achieve this and not try to talk its way out of it. It is as simple as that. If government wants the business sector to pay it on time it is just as reasonable that government pay the business sector on time. This Bill is not draconian. One correspondent suggested that the rules should be the same-the 7th of the month following. We have just made it the 25th of the month so that business people can get that money in their bank accounts before the end of the month. That is very important. I stress that we are not on about promises, we are on about legislation that will oblige our Public Service to meet the obligation or pay the interest that will be incurred by the creditor at that time. The situation is getting worse each year so it is very important that a decision is made on this serious problem now. Recent inquiries by the coalition parties have identified rising concern by those doing business with government of increasing delays in receiving payment. A New South Wales Chamber of Commerce survey showed last year that government departments take an average of 87 days to pay their accounts. In 1980 it was 63 days. This means that for every year we delay this legislation the length of time for governments to pay their accounts will be extended by five days. In less than three years it will be more than 100 days. Just because a representative of a firm used by the Commonwealth Government in New York gives Australia a triple A credit rating and therefore considers it a very good risk does not mean that the Commonwealth has the right to take the same triple A rating as a licence to delay paying its outstanding accounts. Many government departments appear to do just that. Governments should not need to delay payment because of the reasons that can arise in commercial enterprises. Government runs to prepared budgets and unlike small business has unlimited credit and therefore need not make purchases if the funds are not available. The honourable member for Capricornia (Mr Wright) seemed very concerned as to how other members of business were treating each other. Let me say on behalf of those businesses that frequently decisions are taken in business to purchase a stock line or to enter into certain things that put unexpected pressure on a small business. Maybe the stock line does not sell; maybe another creditor does not come in; and occasionally small business is obliged to delay payment of its accounts because of those sorts of commercial realities. This should not apply to government. Government sets clear budgets, has access to the Reserve Bank of Australia for cash shortfalls and, of course, should not place the orders unless it has a clear indication that the money is available. Government is not in a commercial situation in that regard and it should not take the opportunity of the commercial sector of delaying payments of its accounts. But I do not think these delays occur for those reasons. I think it has become accepted that government is a slow payer and the very people charged with administering those accounts have a very relaxed and very callous approach to those people to whom they owe money. Fairness therefore demands that the Government be made to pay at least as promptly as it demands of its debtors. Only legislation demanding prompt payment or the payment of penalty can guarantee the fairness a democracy can expect. I commend the Bill to the Senate. Debate (on motion by Senator Grimes) adjourned. Motion (by Senator Tate) agreed to: That the time for presentation of the Report of the Select Committee on the Human Embryo Experimentation Bill 1985 be extended to 28 August 1986. Debate resumed from 30 May, on motion by Senator Button: That the Bill be now read a second time. Senator GRIMES(Tasmania-Minister for Community Services)(3.41) —On behalf of Senator Button, I seek leave to incorporate the second reading speech in Hansard. Leave granted. The speech read as follows- This Bill is the main plank in the Government's package of measures to encourage research and development in industry. Complementary legislation in the form of the Industry Research and Development Bill 1986 is currently before the Parliament. This provides for grants for research and development, to be directed to companies which cannot derive benefits from this proposed income tax concession. The grants scheme also allows for support to generic technologies and national interest projects. Thus, the two instruments represent a package of support measures for R&D in Australian industry. The specific objectives of the proposed tax concession are: to provide an incentive for greater levels of R&D in Australia; to concentrate new R&D efforts in industry by greater business investment in, and responsibility for, R&D; to provide positive support for R&D activities in industry, on the basis that significant benefits accrue both to industry and the wider community through enhanced competitiveness of industry; to provide mechanisms for encouraging effective use of Australia's existing R&D expertise; to encourage a capacity in industry to be aware of, and exploit, technological developments occurring in other countries. These objectives are part of a broader set of objectives which seek to encourage, through the Government's industry and technology policies, the development in Australia of internationally competitive, export oriented, innovative industries. Australian industry needs to improve its innovative skills and capability by increasing its investment in R&D, by better utilising the existing research infrastructure available in Australia and by developing a capacity for adoption of technology developed overseas. It is only through Australian industry acquiring a ``technology culture'' that it and the wider Australian community can derive the significant economic and social benefits available from world-wide technological developments. The Government's policies aim to assist Australian industry to be active participants in global developments in technology and re-industrialisation. While recent figures have shown an encouraging increase in business sector R&D spending in Australia, this upturn has occurred only after a long period of dramatic decline. The level of expenditure remains well below what is necessary for the long term health of industry and well below that of our major trading partners. R&D spending by Australian industry is estimated by the Australian Bureau of Statistics to be 0.3 per cent of GDP in 1984-85 compared with a median of 0.98 per cent for similar OECD economies. The proposed tax concession will, at present company tax rates, reduce the after tax cost of performing R&D from 54 cents in the dollar to 31 cents in the dollar. Early indications are that this will result in a significant new effort in R&D. Almost one thousand companies have so far indicated through registrations to the Australian Industrial Research and Development Incentives Board that they intend to make claims under the concession-the passage of this legislation should see still more companies making a commitment to R&D. Of the companies which have so far given their estimates of R&D expenditure, an average real increase of over 30 per cent in 1985-86 relative to 1984-85 is expected, with a further 17 per cent increase in 1986-87 over 1985-86. A particular feature of the proposed taxation concession is that it places decision-making concerning R&D in the hands of industry. Thus, it allows commercial considerations to determine the distribution and the level of R&D effort. Companies can also decide on the basis of their own strategies and resources how and where the R&D should be undertaken. Provided R&D is undertaken in Australia, companies may choose to undertake their own R&D, to contract it out to other organisations or individuals in the private sector or to approved research institutions such as universities, the CSIRO, institutes of technology or colleges of advanced education. The proposed concession is an increased incentive for industry to utilise the resources of public sector R&D institutions. This will give a greater practical, commercial orientation within these institutions. This Bill will amend the Income Tax Assessment Act 1936 by providing income tax deductions of up to 150 per cent of expenditure (other than expenditure on buildings) incurred on research and development performed in Australia, during the period commencing 1 July 1985 and ending 30 June 1991. This proposal was announced on 29 May 1985. To be eligible for the concession, a company must be registered with the Australian Industrial Research and Development Incentives Board or its replacement, the proposed Industry Research and Development Board. The definition of eligible research and development activities was formulated after extensive consultation with industry, the scientific community and the Australian accounting profession. It is based on the definition of R&D used by the OECD and the Australian Bureau of Statistics. It closely resembles the definition used by the Canadian Government which operates a taxation concession scheme with similar features to this proposed concession. Apart from presentational differences, the definition of research and development in the Bill is the same as that publicised when the Government announced its proposal to introduce this concession. The central definition of research and development means activities of a systematic, investigative or experimental nature, involving innovation or technical risk undertaken for the purpose of acquiring new knowledge or for creating new or improved materials, products, processes or services. It thus encompasses each of the elements of basic research, applied research and experimental development, which are explained in greater detail in the Explanatory Memorandum that will be made available to Honourable Senators. The definition also includes other activities undertaken in direct support of activities falling within the central definition. These include (but are not limited to) industrial design, engineering design, production engineering, operations research, mathematical modelling and analysis, psychological research and computer software development. Computer software development which meets the central criteria and which is for sale, rent, licence, hire or lease to multiple clients is included in the definition of eligible activities. The design, construction and operation of prototypes where the objective is technical testing or improvements, the construction of pilot plants used as experimental models and ``feedback R&D'', aimed at problem solving beyond the R&D phase, are also eligible activities. The Bill excludes a number of activities that are not systematic, investigative or experimental activities involving innovation or technical risk. These include market research, market testing, quality control, cosmetic modifications or stylistic changes and management studies. Other activities not specifically identified in the Bill but which fall outside the definition are: Pre-production activities such as demonstration of commercial viability, tooling-up, trial and production runs; routine data collection; preparing for teaching; costs of patenting or copywriting the results of R&D work; specialised routine medical care; duplication of commercial products or processes. The Bill provides that the Industry Research and Development Board may determine whether particular activities are research and development within the meaning of this definition: Where the Commissioner of Taxation has doubts as to whether, in fact, certain activities are R&D, the Commissioner can refer the matter to the Board for determination. Except for expenditure on R&D activities contracted out to approved research institutions (as defined in sub-section 73a (6) of the Income Tax Assessment Act), the 150 per cent rate of deduction will be available where total annual expenditure in the year of income is $50,000 or more. Where annual expenditure is less than $50,000 but more than $20,000, a deduction will be available at a phased-in rate of between 100 per cent and 150 per cent, determined on a formula basis provided in the Bill. Expenditure on R&D carried out by an approved research institute on behalf of an eligible company will attract the 150 per cent deduction irrespective of the level of that expenditure. The Bill provides that expenditure on contracted-out R&D, salary and salary-related expenditure and other expenditure of a current nature, is allowable as a deduction at 150 per cent of costs in the year incurred. Expenditure on plant and equipment used exclusively for R & D (including up to $10 million of expenditure on a unit of pilot plant) is to be deductible at 150 per cent over three years in three equal amounts. Expenditure on buildings or building extensions, alterations or improvements used exclusively for R&D activities is deductible at 100 per cent of costs over three years in three equal amounts. The Government is concerned that maximum benefits should accrue to Australia from commercialisation of the R&D work subsidised by the proposed concession. No concession will be allowed where the Industry Research and Development Board certifies that any commercialisation of the results of R&D activities is otherwise than on normal commercial terms or otherwise than in a manner for the benefit of the Australian economy. The Bill also contains safeguards provisions to prevent abuse of the taxation concession. For example, if a building attracts the concession on the basis that it is to be used exclusively for R&D activities-so that its cost is written off over three years-and it is subsequently used for other purposes within five years, the deductions allowed will, in ordinary circumstances, be withdrawn. The Bill provides for this taxation concession to operate in respect of expenditure incurred during the period 1 July 1985 to 30 June 1991. It is the Government's intention that there will be a rigorous cost/effectiveness study on broadly-based criteria before decisions are made about its continuation beyond 30 June 1991. In addition to the cost effectiveness review, there will be a technical review of the concession by mid-1987, to allow consideration of any desirable administrative changes. In conclusion, there are encouraging signs that this proposed measure is being enthusiastically accepted by Australian industry. There is widespread support for the concession from the industrial and scientific community. Together with the grants scheme for research and development, I am confident this proposed concession will lead to a significant increase in R&D activity in the private sector and an enhanced capacity for Australian industry to participate in the global development and exploitation of new technology. Financial Impact Statement The cost of the concession depends primarily on the level of R&D investment by companies. For 1986-87 the cost is estimated at approximately $100m. This is based on data from the Australian Bureau of Statistics and the rate of increase in R&D advised by companies registering their intention to make claims under this concession in respect of the 1985-86 year of income. Costs in later years are less certain but may be of the order of $140 million in 1987-88, with annual costs, when the scheme is taken up in full, of $160 million. Debate (on motion by Senator Sheil) adjourned. Consideration resumed from 30 May. FRINGE BENEFITS TAX ASSESSMENT BILL 1986 Clauses 1 to 8-by leave-taken together. Senator MESSNER(South Australia)(3.43) —I would have hoped that the Minister for Finance, Senator Walsh, was going to be in the chamber-- Senator Grimes —He is coming. Senator MESSNER —I am glad to hear that because it is an unfortunate fact of life that he was not present during the second reading debate and, consequently, the Opposition will have to reiterate the arguments put down at that time throughout the Committee stage in order that we can get appropriate answers from the Government on the various, very serious points that were raised by the 19 or so senators from the Liberal Party of Australia and the National Party of Australia who spoke on the Fringe Benefits Tax Assessment Bill 1986. Firstly, I make the point that the Liberal and National parties have been opposing the fringe benefits tax legislation neck and crop right from the start of this debate. We are now in the Committee stage of this debate and we will be opposing the Bill in each of its major parts and seeking divisions on each of the questions put at the end of each part. I hope that this will give us an opportunity to bring to the Government's attention our very serious concerns about this legislation. I suppose that I should also make the point concerning the rather amazing confession in the Senate today by Senator Button on the question of the visit of the Prime Minister (Mr Hawke) to a country town in New South Wales over the weekend wherein it was claimed that he had no knowledge, or he did not understand, how the farmers were going to be affected by the fringe benefits tax in respect of accommodation being provided not only to themselves but also to their families and, of course, to the workmen working on their properties. This is an amazing revelation and it shows the state of confusion that exists in the Hawke Government at present. Quite clearly, it has lost control not only of the economy but also of the very legislation that it is seeking to put before this chamber. For such an admission that this Government has no idea what is in its legislation coming from a person such as the Prime Minister of Australia leaves us utterly devastated and amazed at this late stage. The point we were seeking to make in questioning the Leader of the Government in the Senate (Senator Button) and the Minister for Finance, Senator Walsh, during Question Time today, was in regard to the Government's intentions in respect of farmers' properties and how it would treat the fringe benefits element. We were able to get absolutely no understanding from the Government as to what it intended to do, In fact, it looks as though the Government intends to do absolutely nothing to alleviate the situation for farmers in country areas who will be devastated by the impact of the fringe benefits tax on housing. The CHAIRMAN —Order! We are considering clauses 1 to 8. I think your remarks would be more appropriate when we are dealing with clauses 25 to 29. I ask you not to develop your argument much further. Senator MESSNER —Thank you, Mr Chairman. I was merely wanting to draw to the attention of this chamber the lack of administration in the clauses of the Bill which we are now addressing. Last Thursday night, during the debate on the Estimates, I asked the Minister for Finance, Senator Walsh, what was the cost to the Government of circulating the purple book to the business houses of Australia. I have received an answer that it cost $3m to send out this document. Senator Walsh —Not the book, the whole lot. Senator MESSNER —The whole administration. I thank the Minister for his clarification. So far, the implementation of the fringe benefits tax seems to have cost $3m, if I take the Minister's answer correctly. Senator Walsh —That is for the whole package, $3m-the publicity and information. Senator MESSNER —I thank the Minister very much for that answer. The other question that I was seeking to have answered by the Minister was: How many people were to be engaged by the Government in order to administer this very difficult and complex piece of legislation? At that time the Minister said that that had not yet been decided. This is another amazing revelation, given that the tax is due to start on 1 July, which is about 30 days away. Consequently, we have no understanding of how the tax is to be administered and how many people are to be engaged in the Australian Taxation Office to control, regulate and collect information to do with this tax. It sounds to me like another assets test proposal. The Government was unable to give us any clear indication of the actual cost of establishing the assets test until the later stages when it was all too late to rethink the enormous cost of administration. We in the Liberal and National parties are concerned not only about the cost to government of establishing a fringe benefits tax, but also about the enormous burden of cost to and the sheer hard work for people in small business who are operating their own farms and who will be required to keep very detailed records about motor vehicles and minute details about the cost of meals and how much of that is to be allocated in order to assess the fringe benefits tax and so on. All these things will add enormously to the cost of business. It will be not so much the business that bears the cost-it certainly will in the first place-but later those costs must be passed on to the rest of the community and, as such, we can only see it being inflationary in the long run. I would like to mention to the Minister one other matter. Since business will be required to lodge returns within 28 days of the end of each quarter, when these returns are required to be made up, it is obvious that many businessmen will be seeking the support and assistance of the accountancy profession. The first return that will be due after 1 July will have to be made up to 30 September in the next financial year and the return itself will need to be lodged 28 days thereafter. It seems to me that the Government should give consideration to the confluence of events that will then occur in October. Anybody who has had anything to do with the accounting profession will know that October is one of the busiest months in an accountant's calendar insofar as he is required to lodge 50 per cent of his quota of income tax returns on behalf of clients by 31 October. Clearly, he will now be faced with a much heavier work load in respect of the requirement to lodge fringe benefits tax returns-a brand new tax, by the way, which will be confusing in its initial period of introduction by 28 October. Clearly, a lot of midnight oil will be burnt. There will be lots of problems in administering this tax and getting the first returns lodged during October in this calendar year. I wonder whether the Government has thought of this because, quite clearly, if the accounting profession and those who are involved in the preparation of taxation returns on behalf of their clients are required to meet both deadlines and they fail to meet them, especially the lodgment of income tax returns on behalf of their clients, it could well be that their clients will be penalised as a result of the non-lodgment of returns. If the Government has any suggestion as to how this difficulty might be overcome, I would be very pleased to hear it. The fringe benefits tax Bills are an absolute disaster. The Liberal and National Parties believe that this tax will be costly to business as the Government expects to raise some $600m and we make the point that the administration of the tax will be so difficult, so burdensome and so onerous to business and in the longer run to the whole population of Australia that it is not worth the candle. This comes right on top of the recent announcement of economic statistics which show that the nation is in decline economically. The Government is about to impose further cost burdens on people at a time when they are struggling to get on top of the economic problems of this nation. The taxation being imposed will not have all the immediate benefits that the Government claims for it. I will return to that point a little later during the debate on other parts of this Bill. The point I make when I say that is that the Government claims that this will somehow catch out tax cheats. By the Government's own admission and by Senator Walsh's own statements, it is clear that the imposition on the rather ramshackle tax system that now applies of this fringe benefits tax will only increase the incentive for people in business to cash out benefits. This will eventually lead to the imposition of the fringe benefits tax on the employee and not upon the employer; that is to say, the employee will eventually be paying the tax. The Government has made it quite clear in the last few days, through Senator Walsh's statement, that it intends to force employers to cash up; that is, to pay out the equivalent of the fringe benefit in cash so that it can be made subject to tax in the hands of the recipients. That is quite clear from the Government's statements. Clearly it is at odds with its claim that this is going to be a different kind of tax which can be more efficiently raised by taxing the employer rather than the employee. At a later stage in the debate I will be seeking to have incorporated in Hansard details of calculations which demonstrate that point quite clearly. At this stage I hope that the Government will be able to answer our questions and give us a clear indication of the number of staff in the Australian Taxation Office who will be involved in the administration of this legislation and be able to advise the Senate of the arrangements the Government will be making with those in the professions who will be engaged in lodging income tax returns and who, at the same time, will be obviously engaged in assisting taxpayers with the new fringe benefits tax. What other arrangements is the Government making to ensure that people in the community generally understand their obligations under this new law? Senator SHEIL(Queensland)(3.55) —I have a few queries I would like to raise with the Minister for Finance (Senator Walsh). I also have a few anomalies I would like to point out. I hope that he can explain the situation to me. By way of introduction, I agree with the statements Senator Messner made at the end of his speech. I point out that there were only two reasons why fringe benefits were introduced: Firstly, it was because the rate of taxation was so high and fringe benefits were a means of getting some relief from the excessive rates of taxation. Instead of reducing taxation and causing a boom, the Government is now taxing fringe benefits. Secondly, fringe benefits were used as an instrument of development not only in the country areas but also in the mining industry and in business generally. They were a means of expanding businesses and attracting people to the work force by means of establishing good will not only between people working in businesses but also between business and the community generally. The four main areas the Government is attacking are housing, food, travel and debts. Fringe benefits really represent the Australian people's adaptation to the depredations of government taxation. Undoubtedly, as the Minister said in his summing up of the second reading debate, the big guys took more advantage of the fringe benefits than the small guys but then it was ever thus. I think it will probably be so under the fringe benefits tax that is being introduced. Does the Government think that by revolutionising the system and turning it into a cash basis system it will stop the rorts? I do not think it will do that. For example, who will pay the tax on the enormous entertainment allowance that the Commissioner of Taxation gets at the moment? It will not be the Tax Commissioner. The taxpayer, the ordinary working man, will pay the tax; that is who will pay it. I cannot imagine anyone wanting to have tea with the Tax Commissioner anyway. All bureaucrats really-I am just using the Tax Commissioner as an example-will not be responsible for paying the tax. The Government will be responsible for paying the tax. We are saying that, in effect, the ordinary people will pay the tax. The Government may think that it will get at the rich and big companies in this regard. I would point out that if the Government took the entire profits of the top 100 companies in Australia as taxation it would only be enough to run the country for about a week. It is important for the Government to realise that the bulk of the people pay the bulk of the taxes and the ordinary worker is paying the Government's taxes. It is a big transfer of responsibility for taxation to the people. Self-assessment transfers the responsibility to the people and it is virtually turning us all into-- Senator Siddons —It has nothing to do with this Bill. Senator SHEIL —Not this particular Bill; I was off the track there. But it is turning people into vassals of the State. I think it will cause a hidden revolution in the way of life in Australia. What does the Minister expect us to get in return for these extra taxes? We will get more welfare, more bureaucracy, more regulations, more controls-a repeat of the whole business-but we will get less development, less wealth, less defence, less maintenance of our law and fundamental rights and less freedom. The Government wastes money. The Government does not create wealth; it consumes it. Concerning the anomalies, many fringe benefits already exist for just about everybody except the small businessman. As an example, a chap working and getting about $400 a week is receiving about $176 in fringe benefits. That does not include government costs. As I see the Minister giving that querulous look I will list these fringe benefits: Annual leave, public holidays, long service leave, sick and compassionate leave; and other allowances including paid non-productive time, workers compensation, payroll tax, employee amenities and superannuation. Other costs bring the total to $176 a week. On top of this amount he is getting penalty rates for weekend and evening work. Senator Walsh —That is all taxable. Senator SHEIL —Well, these are fringe benefits already in existence. I will speak on other clauses later. I just call those anomalies to the Minister's attention now. Senator REID(Australian Capital Territory)(4.01) —Clause 3 of the Fringe Benefits Tax Assessment Bill 1986 states: The Commissioner has the general administration of this Act. This is understandable and expected, but the burden of administration will fall upon the officers of his Department who, I suggest, are already overworked. I hope the Minister for Finance (Senator Walsh) will tell us how many more people will be employed for the purpose of administering this legislation. We are told in the financial statement that the income that is expected to be derived will be $333m in 1986-87, $540m in 1987-88, $625m in 1988-89. But the financial impact statement is fairly inadequate in that it does not give any indication at all of the actual costs of administering this legislation. We have heard that $3m will be used to promote the tax package, but what are the actual costs of collecting this tax? The costs will be enormous, of course, to the businessman who has to file the returns which are required. The reason I specifically raised the ability of the present staff of the Australian Taxation Office to cope with the administration is what is presently happening with the most recent addition to taxation, the prescribed payments tax. I suggest that the reason is that the Office is overworked and not able to cope with the burden of it. The Taxation Office is currently issuing assessments to taxpayers and not allowing credits for prescribed payments tax already paid by taxpayers. Provisional tax raised in the assessment does not take account of those credits for prescribed payments tax. The assessments that are due and payable in total, prior to the end of the financial year and not including it, are significantly larger than they ought to be. Assessments which have been issued up to four months after the returns have been lodged with the Taxation Office have not been dealt with. It would seem that the Taxation Office can proceed with legal action and impose penalties on the full amount stated in the notices of assessment even though the notices of assessment, in fact, result in the taxpayers being triple taxed when the provisional tax is considered. Interest on outstanding tax is then charged at 20 per cent without any deductions, and any refund subsequently paid to a taxpayer would bear interest at 14 per cent but be taxable in the hands in the taxpayer. I will seek leave to incorporate a copy of a tax assessment adjustment sheet which states on it in handwriting: Your claim for Prescribed Payment Credit has not been allowed at this state. The matter is currently under review and an appropriate amendment will issue in due course. It does not go to the trouble of telling the person concerned that he only has 60 days in which to appeal in any event. This is not, of course, the fault of the officers of the Taxation Office. They are attempting to do their best with this complex legislation which is being brought in without them being given the adequate opportunity to assess the needs of the Office in dealing with it. I am told that 600 to 700 taxpayers are affected presently by the situation in the prescribed taxation area, that the Office is not able to keep up, that people are not able to get answers to their questions and that the Commissioner of Taxation has instructed assessors to issue assessments without reconciling the prescribed payments claims that have been made. What has been of even more concern to some of the accountants, who have now found out what the situation is, is that they are not being told of this while $3m is being spent in advertising the new tax schemes. The existing situation is not advertised and people are left to find out for themselves. A person who is doing his own tax really is vulnerable. The procedures have not been made plain. I hope that the Minister can tell us what will be done in the prescribed payments area because it is also part of the administration of the Taxation Office. Also, what arrangements are being made to see that the fringe benefits tax operates in a smoother fashion than has been the case with this other one. I used the evidence of what has occurred with the prescribed payment tax to indicate the problems which the officers are facing. It is frustrating for officers of the Taxation Office to be working under this sort of stress. It is traumatic, I suggest, to be always that far behind with one's work. Now, those officers will be burdened with this additional legislation dealing with the fringe benefits tax. I seek leave to incorporate in Hansard a photocopy of an income tax adjustment sheet from which I read. Leave granted. The document read as follows- INCOME TAX ADJUSTMENT SHEET File Number The following adjustments have been made to the taxable income and claims for rebate and concessional expenditure in respect of your return for the year ended 30 June 1985 $ Taxable income as returned... 12,500 NOTE: Your claim for Prescribed Payment Credit has not been allowed at this stage. The matter is currently under review and an appropriate amendment will issue in due course Taxable income as shown in attached notice... 12,500 Adjustments to claims for rebate and concessional expenditure Increase $ Decrease $ No change Senator WALTERS(Tasmania)(4.07) —As the government has done costings for the car industry can the Minister for Finance (Senator Walsh) give us the costs to the rural community? Can the Minister give us the cost of sending out the lilac booklet? Will this booklet have to be withdrawn to change the figures seeing there is a deal being done between the Government and Senator Chipp? Can the Minister tell me whether the Government will withdraw that booklet and send out an amended version? If so, what will be the additional cost of sending that booklet out? Senator WATSON(Tasmania)(4.07) —Australia has embarked on this unique system of taxing fringe benefits in which the tax will actually be paid by the employer. Since New Zealand is the only country to introduce such a scheme, I ask the Minister for Finance (Senator Walsh): How is the administration of this tax proceeding in New Zealand? Is New Zealand collecting more tax than was originally estimated. How accurate does he believe his figures are for the collection of this tax in Australia? Apart from New Zealand, Australia is the only country in the world embarking on this system of taxing the employer. Why is it that in all other countries taxation authorities or inland revenue collecting authorities can devise mechanisms for taxing fringe benefits in the appropriate hands, those who receive the benefits? Why is it that the Australian Taxation Office is incapable of developing those techniques, incapable of developing the administration to collect that amount of money? I add to a question asked by Senator Walters: What is the cost of issuing the various little pamphlets in addition to this little pink booklet on fringe benefits taxation? I refer specifically to the booklet in relation to travel and car expenses. Senator BOSWELL(Queensland)(4.09) —I would like to make a few remarks on the fringe benefits tax legislation. This tax certainly has everyone in Australia worried. As we went out over the weekend-I am sure most honourable senators experienced the same reaction as I did-we found that people were absolutely terrified. I would like to tell the Minister for Finance (Senator Walsh) that the lilac books which were sent out are very difficult to understand. Most people's reaction to the booklet as they struggled with it for two or three hours-- Senator Walsh —They could have been from the National Party. Senator BOSWELL —No, they were not National Party; these people were from a cross-section of the community. Some were business people who employed 20 or 30 men. One gentleman who has a meat processing business told me that it was going to cost him $500 each quarter to have his taxation consultant prepare his fringe benefits returns. His immediate reaction after reading the lilac book on the plane was to rip it up into 14 pieces and send it back to Mr Keating. Of course, it would not do him a lot of good. His reaction was: `Well, if they tax us any more I am going to close my business down, I am going to walk out and I am not going to employ 20 or 30 people'. That is the sort of reaction we are experiencing from the grass roots of business as this Government increasingly puts pressure on it with one tax after another. One gentleman told me that the shipping company he represented would have to pay $352,000 just to provide fringe benefits for the crew of one particular ship. These little anomalies are coming forward all the time. I would like the Minister to take into consideration the fact that business is absolutely terrified of this fringe benefits tax. Senator Walsh told us in his second reading speech that he believes he is going to collect $330m in the first year of operation of this tax. I would like Senator Walsh to comment on some figures I have and to tell me whether they are right or wrong. In the car industry alone the Federal Government is going to miss out on $82m in sales tax and $15m in import duty. There will be a $49m loss in company tax and a loss of $70m in income tax in respect of retrenched workers. Of course, we are not considering the dole payments that will have to be made to the 10,000 retrenched workers. The Commonwealth will lose a total of $276m in revenue. In addition, the State revenues that will be lost as a result of this tax include $8m in payroll tax, $11m in stamp duty and $3m in registration fees. The total loss in respect of the car industry will be $298m. I wonder whether Senator Walsh can tell me whether that is an accurate figure because-- Senator Walsh —It is bullshit. The TEMPORARY CHAIRMAN(Senator Colston) —Order! Senator Walsh, that kind of language is not acceptable in this chamber. I ask you to withdraw it immediately. Senator Walsh —Yes, Mr Temporary Chairman. I could not think of any other word which so aptly describes the quality of what is being dished up. The TEMPORARY CHAIRMAN —Senator Walsh, I ask you to withdraw that remark unconditionally. Senator Walsh —I withdraw. Senator BOSWELL —Mr Temporary Chairman, I am offended by that remark. I think it is absolutely disgraceful that a senior Minister should use that sort of language in this chamber. The TEMPORARY CHAIRMAN —Senator Boswell, the remark has been withdrawn. Will you continue with your remarks? Senator BOSWELL —Thank you, Mr Temporary Chairman. I did not prepare these figures; they were prepared by the Federated Chamber of Automotive Industries. The figures were not prepared by Ron Boswell or any other senator in this chamber. They were put down by an industry group representing the motor vehicle industry. Other senators have probably had representations from car distributors in their own States. One distributor told me that he is sustaining a sales fall of 28 to 30 per cent. I have been told that most businesses can sustain a 10 or 15 per cent sales drop. However, there is very little future for an industry which is sustaining a 30 per cent sales drop. I believe that the mining industry also needs to be discussed. I understand that it will cost the mining industry $61m to provide fringe benefits that are absolutely necessary. It is essential that benefits in the form of housing and electricity are made available to miners. Maybe Senator Walsh can tell me how else a miner can be attracted to a place two or three hundred miles from a city on the seaboard. Does he expect a miner to buy a house in an area that could be mined out in six or seven years? What does a person do with his house when the mining operation moves on? How does a mining company get around that situation? Can Senator Walsh tell me, because he is a farmer-- Senator Sheil —Was. Senator BOSWELL —No, he is a farmer. Does he believe that a person working on his farm should be given a fringe benefits in the form of a cottage? How does he see-- Senator Walsh —We used to do the work ourselves. Senator BOSWELL —Well, the Minister might have a small property. However, other people with larger properties require extra-- Senator Walsh —We know the people you represent do not do anything themselves. Senator BOSWELL —I am finding these remarks continually offensive. Does Senator Walsh expect the rural industry to provide accommodation? Where does he expect people working on farms 30, 40 or 50 miles from the nearest town to live? Also, has Senator Walsh considered that many farmers give their retired workers a cottage for use in their retirement in return for turning on a pump, feeding the chooks or being general caretakers? These people have given their working life to particular property owners. In return, the property owners have turned over a cottage and said: `Look, you can live there rent free-just look after the place when we are not here'. Where are those workers, whom the Australian Labor Party is supposed to represent, going to live? They will have to live in old people's homes because there is nowhere else for them to go. I would like Senator Walsh to put forward some propositions on where rural workers are supposed to live. Also, I would like him to tell us something about mining companies and shipping companies. For goodness sake, I want him to tell us whether a book can be written in simple terms that people can understand. I have endeavoured to read the book that deals with the fringe benefits tax. I believe that I have average intelligence. My colleague Senator Sheil is a doctor and as such has certain qualifications. However, even he is battling to read it as are all my colleagues on this side of the chamber. The Minister may have some brilliant people on his side of the chamber. However, all my colleagues have been having great difficulty in understanding the book. My former business colleagues have tried to understand the book but they cannot make head or tail of it. Nobody has any hope of understanding this very difficult book. I would like Senator Walsh to address those questions in his reply. Senator NEWMAN(Tasmania)(4.18) —I rise to speak generally on the first clauses of the legislation. However, I feel that the Bill is a misnomer in that it should be known as the Keating-Haines fringe benefits Bill. It was conceived by the Treasurer (Mr Keating) and given birth by Senator Haines. It is interesting, of course, that in giving birth to it, Senator Haines has obviously been pressured by the car industry. It is interesting to see that the Australian Democrats can be crushed by pressure. However, perhaps they have not been crushed hard enough. The car industry is very vulnerable to this legislation. I am afraid that the debate which has taken place on the car industry has sadly tended to obscure the fact that this Bill will apply to business generally and that all industry will be the poorer. Of course, employment and inflation will also suffer. The spare parts industry, which is very dependent on the car industry, is another area which has not received much attention. However, the fact that some deal has been done by the wheeling and dealing Democrats who, as a result, have lost credibility throughout the country, does not hide the fact that there is still a big slug on the motor vehicle industry and that other people will suffer very badly as a result of the legislation. Senator Siddons —We have saved the car industry $200m a year. Senator NEWMAN —The honourable senator has not saved the car industry, so he should not crow about it. What has he done about the small businesses that are going to suffer? What has he done about the voluntary organisations? Senator Siddons —I am worried about 200,000 jobs. Senator NEWMAN —I will demonstrate how the honourable senator is helping in regard to jobs. He is putting those workers on the unemployment lists. I was interested to hear the claim of Senator Haines on Friday that she is hardly likely to lose a large percentage of her votes because she is supporting something which is equitable and moral. I found that intriguing because it is a bit like claiming that she is in favour of motherhood. We all believe that in theory this legislation could be equitable and moral, but it is the unfortunate fact that the Keating-Haines Bill has introduced something quite inequitable and immoral. It is inequitable as to the way it will fall and the administrative burden it will cast on small businesses particularly; and it is immoral as to the people who will have to bear the tax. The administrative nightmare that small businesses will face and the enormous costs imposed by this legislation are appalling to consider. It is really only now that small businessmen are grabbing the time to go to seminars to find out what their responsibilities will be under this legislation, and they are appalled and very frightened. Even the Commissioner of Taxation has not been able to get it right. The lilac or purple book-it is a multicoloured book, by the sound of things-is certainly a horror book full of mistakes which have had to be rectified. I am sure that we have not seen the last of those mistakes yet. If the Commissioner of Taxation cannot get it right, how can the small businessman who is struggling to do his books at midnight? He has to take the place of a workman in his business because he cannot afford all the employees he would like to have, so he has to get his hands dirty and do his books at night. We know that is a fact of life throughout this country. The farmers, whom Senator Walsh likes to ridicule, the ones with dirty and broken fingernails, are also trying to do their books at night, so it would pay him to treat them with a little more respect. They are the producers of this country, which is more than can be said for him. The proprietor of a small firm who does his books by lamplight, if he does not do the books himself, usually will employ someone who is not highly paid and does not have high qualifications. That employee will now have to go because the small businessman will have to have his books done by an accountant. As a number of speakers in this debate have said, this legislation will be a bonanza for the accountants-about the only profession that will do well out of this legislation. These costs will have to be passed on-the costs both of the taxes themselves and of the administration of the legislation. Where will they be passed on? They will be passed on to the consumers, or employees will have to lose their jobs. The manager of one factory in my State has said the he has done his sums and has worked out how much the business will be liable to pay, which equates to the cost of employing four or five employees. The business is telling its employees that it will be looking very closely at the incidence of this tax and, if those facts are right, those four or five jobs will have to waste out. It is a fact that there will be a loss of jobs directly through this legislation. I would have thought that this was not the time to add to the unemployment level in this country. Alternatively, Senator Walsh wants employees to take the cash. I want the employees of Australia to know that Senator Walsh wants them to take the cash so that he can more easily grab the taxes. That is fine and fair and everybody thinks we should have an equitable tax system in this country. I certainly agree with that, so long as it is clearly understood that Senator Walsh wants to see that the employees of Australia will pay more tax. I thought the Government was claiming that it would cut tax, but this is obviously a misapprehension on my part. The Government is looking for more, but has not thought about cutting back its expenditure. From talking to people in my constituency, it is interesting to find a slight difference in attitude between big and small firms. It is worth making a comment in passing that big business tends to be not nearly so worried or concerned about this tax, for a very interesting reason. Senator Siddons —They have had a look at the figures, that is why. Senator NEWMAN —Not at all. It is because one talks to the middle management of big business, who will continue to get their perks, paid for in the first place by the company and in the second place by the consumer. They are not bothered at all; but we will all pay, firstly, as consumers and, secondly, in the long run as a nation through inflation. If we do not have unemployment we will have additional costs. Which way does Senator Siddons want it? This is a Keating-Haines Bill, conceived by the Treasurer and given birth to by Senator Haines and her fellow Democrats, and the buck stops with them. Senator PARER(Queensland)(4.25) —I would like to address myself to a few issues. Firstly, the fringe benefits tax has been described by others as immoral because the power already exists to collect taxes on employees' benefits. The fact that there has been an administration problem and the Australian Taxation Office has been unable to administer the Income Tax Assessment Act as it is already is no excuse for an additional 179 pages of legislation and an explanatory memorandum of even greater length. The administration will be an absolute nightmare, not just for the employers but also for the Taxation Office. To fortify that statement, I remind the chamber that I have had a number of calls from people in the Australian Taxation Office who have attended seminars and their advice to us was to try to prevent the legislation going through because they felt they could not administer it. I would like to address the cashing out of fringe benefits. The Minister for Finance (Senator Walsh) has said on a number of occasions that if people do not like this they can cash out the fringe benefit. That might be all right for contrived salary packages. It seems to me that the Government and the Minister for Finance have a fixation with people who have contrived salary packages, but they are by far the minority of those who will be affected by this quite outlandish legislation. It is estimated that in the tourist industry this fringe benefits tax will mean a net increase over 12 months of something like 20 per cent in the cost of providing tourist services. I remind the Government and the Minister that the tourist industry has been one of the great growth areas, particularly in my State of Queensland, despite other adverse factors such as penalty rates, which are a ridiculous anachronism today. A lot of tourist areas are on island resorts. How on earth can fringe benefits be cashed out on an island resort? There is nowhere else to stay. I mention that as an example, but it applies also to motels and hotels. In a 24-hour industry it is expected that the manager of a hotel or motel will live on the premises. It is anticipated that the tax will cost an ordinary size motel in a tourist area in the order of $25,000 per year, before administering it. The ability to cash out fringe benefits in the mining industry will be an absolute impossibility. In mining towns the infrastructure-houses, water, power, railway lines, roads and communications-are paid for entirely by the mining company without any cost whatsoever to the taxpayer. The mining companies will now be penalised for providing that infrastructure, which was done at their own expense. If there were a market for houses in mining towns, I am sure that the houses would be sold. The Government will be aware that the only way employees can be attracted to mining towns is for the companies to provide certain infrastructures, such as housing, at reduced rates. By way of example, when the Hunter Valley and Port Kembla areas had difficulties some years ago and many miners were put off, the miners were recruited in central Queensland and were given the same fringe benefits which applied to all the miners who worked in Blackwater, Moranbah and Dysart. The interesting thing was that when the market recovered the workers all went back to New South Wales, despite the so-called high fringe benefits. So the cashing out is an impossibility. Even if the companies wished to cash out, they would have to offer the houses for sale to their employees at very low rates. If they did that, they would be classed as fringe benefits and they would have to pay tax on what was considered to be the market price, as against the price that would be received if the houses were sold on the open market. So there is a contrived and statutory formula that applies-I think the figure is about $35 per man per week-to every home in every mining town in Australia. The cost to a small company at South Blackwater is approximately $1m, which completely wipes out the profit. When that company decided to shut its underground mine and put about 400 people off the payroll, direct responsibility will have to be borne by this Government. I turn briefly to educational and charitable institutions. At Question Time in the Senate-- The CHAIRMAN —We will come to that later in the Bill. Is this under the general administration aspect or are you referring to particular matters? Senator PARER —It is general administration, Mr Chairman. The CHAIRMAN —You should not ask questions about particular matters. That will come later in the debate. Senator PARER —Thank you, Mr Chairman. I will refer briefly to educational and charitable institutions. It has been claimed that the Catholic Family Welfare Bureau in South Australia approved of what the Government had done. This must have been the only letter that the Government received in support of the fringe benefits tax. It also shows that the person who wrote that letter or who made that comment had not received his little mauve booklet or that he had not read it, because the general consensus of views of all educationalists and of people engaged in charitable work is that it will cost them enormous amounts of money. I have concentrated on the cashing out aspect of fringe benefits. For instance, when the Catholic Education Office in Brisbane was asked whether it should cash out, its reply was that if it decided not to have vehicles, the cost to it of employees providing their own vehicles would break the charity. So charitable institutions, the mining industry and people in the tourist industry cannot cash out in regard to these so-called fringe benefits. Obviously, as a corollary of this, if this fringe benefits tax is passed-it is apparent that it will go through with the support of the Australian Democrats, except for one minor amendment-it will mean that less money will be available for welfare, education and other services. Senator MICHAEL BAUME(New South Wales)(4.33) —At this stage I will make only a few brief remarks in dealing with the general question of administration of this legislation. I draw attention to one particularly disturbing element of the legislation which means that it will apply in situations where a business has made, or is making, a loss. Even though it is making a loss and it would not otherwise be liable to pay any other taxation, it will now be liable to pay the fringe benefits tax. It seems to me that this will impose an extraordinary burden, particularly on the rural sector. Very few people in the rural sector will be able to report any profits or will have available any funds out of their trading to do much more than survive, let alone pay a tax when they have made no profit. It seems to me to be less than intelligent for the Government at this time to provide yet another disincentive of this nature. This point has been made by honourable senators during many second reading debates. It emerges, of course, because the tax is to be imposed on the employer, not the employee. We have heard of the impact of that on charitable and other organisations. That will no doubt be raised again, of course, at the appropriate time during this Committee stage debate. But it is worth stressing that not only will it have an unfair impact on non-profitmaking organisations, but also in effect it will place an added burden on those enterprises which are suffering losses. Senator Siddons —We are moving an amendment on this aspect. Senator MICHAEL BAUME —Yes. I am glad to hear that the Australian Democrats are sufficiently concerned to be doing something positive in this case. Senator Knowles —Not too much. Senator MICHAEL BAUME —Not too much. I think that is a reasonable interjection. Certainly they have done enough in terms of deals with the Government to ensure that this offensive and oppressive legislation is passed. I will read to the Committee one of the many letters I have received on this matter because I think it sums up the concerns-the very proper concerns-that small business people have. The letter is from a Mr R. S. Dawson of Roydens Menswear in Cronulla. His letter reads as follows: Last Tuesday I received from the Department of Taxation a 56-page booklet outlining the proposed Fringe Benefits Tax. Since then, I understand that this legislation has passed through the House of Representatives. I feel that the Government has deliberately misled the Australian public over the number of people this legislation will affect. It will, in a time of high interest rates and low consumer spending, add a further burden upon every individual Australian and business. I must also point out that it is a direct attack upon the business community. Taxing businesses giving employees a benefit, not the person who is receiving the benefit, would appear to be in contradiction of the Australian income tax system. This tax is a direct charge on all business, and will cause a subsequent loss in profit, with all its ramifications, i.e., loss of jobs, inflation, and further wage demands, thus worsening the Australian economic position. I would urge that the legislation be most vigorously opposed in the Parliament. I must say that there is no need for him to urge the Opposition to do that. I suggest that he might direct his enthusiasm towards the Democrats who have, of course, done this deal with the Government so that this legislation will be passed. He continues: The effects of this regressive legislation on the economy, the cost of administration, in both Government and private business, and the effect on the general public should be fully aired in the public forum. The above points cannot be expressed strongly enough, thus making the Government fully aware of the Australian people's anger and disgust at yet another unjustifiable tax, in order to finance the Government's gross incompetence in its handling of the Australian economy. Mr Dawson is simply reflecting the general view, I believe, of the great bulk of small businesses around Australia. For that reason I have referred to his letter at this stage in the debate. Senator WALTERS(Tasmania)(4.37) —I refer to Part II, Administration, clause 4, which states: The Commissioner shall, as soon as practicable after 30 June in each year, prepare and furnish to the Minister a report on the working of this Act- that refers to the annual report- including any breaches or evasions of this Act of which the Commissioner has notice. I wanted to ask a question of the Minister for Finance (Senator Walsh), who is handling the Fringe Benefits Tax Assessment Bill in the Senate. I find it very difficult to ask him any questions because he is not present. The Minister for Veterans' Affairs, Senator Gietzelt, who is present, is not sitting near his advisers. I feel that the Government is handling this matter in a very superficial way if the Minister is not prepared to be present to defend his Bill. I want to find out from the Minister why this clause is contained in the Bill. Is there such a clause in any other comparable Bill? Is it a method of attempting to intimidate the taxpayers by saying that their names and any breaches will be included in the annual report and will be tabled by the Minister in this place? I am at a loss to understand why it is contained in the Bill. I have quite a bit more to say on this matter. I will await the arrival of the Minister. Senator MESSNER(South Australia)(4.39) —I find it amazing that about six or seven speakers from the Liberal and National parties have dealt with very important questions of administration, but the Minister for Finance (Senator Walsh) has not been present to answer them. The Minister has just arrived. Perhaps he can answer those questions for us. Senator WALSH(Western Australia-Minister for Finance)(4.40) —We have just had virtually another second reading debate. The Liberal Party of Australia has picked yet another political lemon and now it has to suck it. On this matter, as with its passionate defence of the free lunch, it is offside with the people. It is absurd, to say the least, that those who argue-as most Opposition senators do-that there is nothing wrong in principle with the taxing of fringe benefits or, more accurately, of income paid in kind rather than cash, criticise this legislation on the basis of the resources that it will consume in administration. It is absurd that the same people should then complain that the administration of this legislation in the form in which it has been introduced by the Government will require more bureaucrats. Senator Messner asked how many extra bureaucrats there would be. If this measure is taken in isolation there certainly will be a requirement for significant additional resources in the Australian Taxation Office. However, some of the other policy changes in areas which required greater numbers of people for the initial administration do not need so many and these numbers will be phased out, giving a gross figure and a net figure. That number has not yet been determined and, indeed, there are very few departments which, at this stage, have determined their staffing levels for the next financial year. It is nothing at all unusual that the ATO staff levels have not yet been determined by the Government because that is the position for most departments. We have not started determining the levels for the next financial year. Senator Messner also asked what would happen as a result of the pressure on the availability of accountancy services where there are quarterly returns-in particular, on 1 October. Extensions will be fairly readily granted as they are fairly readily granted by the Australian Taxation Office to the 31 August requirement for self-employed people lodging their returns. I would have thought that Senator Messner would know that. That was rather spurious criticism. Anyway, the Government's preferred response to this tax is that the benefits be cashed out, thereby avoiding all the administrative problems, both for employers and the Australian Taxation Office. The option is available for employers to cash out benefits and if they are really worried about what they claim is an onerous responsibility for their part of the administration, they can exercise the option. The Government hopes that most employers will take that option. From the public perspective there will be the additional benefit of the requirement for public resources being reduced as well. Senator Reid raised some questions about the administration of the provisional payments system. This is not the subject of this Bill, but I am glad she mentioned it because she reminded me of an incident that happened in Perth nearly three years ago. The PPS, which had been foreshadowed by the Fraser Government in about September 1982, was brought into operation on 1 September 1983 by this Government. I attended a meeting in Perth of the Confederation of Western Australian Industry, a group of people who were complaining about the PPS which was about to be introduced. They made the same sorts of dire predictions about the effect that the PPS would have on economic activity as various members of the Opposition have been about the fringe benefits tax today and on other occasions. I fronted up to these people and I told them that I regretted that the facts were still being misrepresented in an advertisement which appeared in the Western Australian newspaper that morning and which had been inserted by the Confederation of Western Australian Industry. The advertisement asserted that the PPS was a turnover tax. I told the officials that it was not a turnover tax and if they did not know that they were guilty of culpable negligence and ignorance, and if they did know it they were guilty of wilful misrepresentation. We have seen yet again the situation whereby whenever a government takes action to close off some lurk or perk in the taxation law there is an orgy of culpable ignorance and wilful misrepresentation. Senator Walters asked about the cost of this measure to the rural sector. That has not been quantified because it will be so insignificant. If honourable senators want a rule of thumb, I suggest that they take whatever figure is given by the National Farmers Federation and divide it by some number between 10 and 100. Senator Walters and others also asked about the cost of the mauve booklet. I cannot give that specifically but last week I answered a general question about expenditure in both this and next financial year for the supply and or distribution of information on the taxation system and I believe that it is of the order of $3m. I apologise for not having that figure accurately checked out, but it is something of that order. We heard from Senator Newman-and in varying degrees the same proposition was put by a number of other Opposition senators-that the cost of this tax would be borne by business and that it would bankrupt it. We also heard that the cost would be passed on to consumers in higher prices and that it would crank up inflation. Then we heard that it would be passed back to employees. In other words, we heard three mutually exclusive propositions put forward about the effects of this tax. Opposition senators cannot have it two ways, let alone three. There are a number of amendments forecast, some of which the Government will accept, and I suggest that the Committee proceed to deal with those specific amendments and the other clauses of the Bill. Senator WALTERS(Tasmania)(4.47) —Either deliberately or because he was not aware of it, the Minister for Finance has not answered my question about clause 4. I asked why the Commissioner of Taxation, in furnishing his annual report, would give the Minister a report including any breaches or evasions of this legislation which the Commissioner had noticed. I asked whether this was a method of intimidation. Is the Government saying to the people: `If you assess yourselves incorrectly, we can assure you that your breaches will be tabled in the Parliament and your names will reach every corner of Australia? I cannot see any other reason for the inclusion of that information in the annual report. I hope the Minister will answer that. The Minister also failed to answer a question I asked in talking about the costing of the lilac book. Seeing that the Government and the Australian Democrats have come to a deal and the Government was foolish enough to send out the lilac book before the legislation passed the Senate, will the Minister now have to send out another booklet containing the correct information? What does the Government intend to do? Senator Walsh said he did not know how much the lilac book cost and that is a disgrace. He should know the wastage involved in sending out that book when the legislation had not even passed the Senate. The Minister said he had no idea about the cost of this tax to the rural community-the words he used were that it had not been quantified. I rang the office of the Treasurer (Mr Keating) and I asked Mr Greg Smith about the cost to rural industry. He said that that cost was not available for me to know. I said: `Surely that does not mean you have not done your sums and you do not know what the cost will be to the community?'. He replied: `I did not say that, Senator; I said that we are not divulging the cost to you or anyone else'. Obviously either the Treasurer knows and has not told the Minister or the Minister is right and the Treasury has not bothered to find out what the cost will be to the rural community. As the Minister may well know, I have done some sums on this, getting the figures from the Bureau of Agricultural Economics and from the Parliamentary Library. I want to know whether my figures are anywhere near correct. If they are correct, the Minister will find that in Tasmania alone the accommodation of one farmhand, using the Treasurer's figures, is worth $40 a week. He is supplied with 12 kilos of meat at $2 a kilo and is allowed to have milk from the property. Electricity, at very conservative prices, will cost the employer $1,592 a year. I am presuming that every cottage on the farm is considered to be in an isolated area and am allowing for the $200 threshold. I want to find out from the Minister whether my figure is accurate. I know other figures are available. The Livestock and Grain Producers Association has assessed the total cost to the rural community at $150m. I have just calculated the cost of a single farm hand employed on a typical farm in Tasmania. I ask the Minister whether my figures are anywhere near correct. We have to remember that the Livestock and Grain Producers Association has calculated a figure of $150m at a time when the rural community, according to the Bureau of Agricultural Economics, is at an all time low. The bureau estimates that rural income has dropped by two thirds. It says that the average net farm income has dropped from $19,470 in 1984-85 to an estimate of $6,700 this year at a time when the rural community is in recession and when this Government is wanting the rural industry to help it out of its balance of payments problems. The Government believes that because the rural and mining industries are such large exporters of goods they need to help Australia out of its balance of payments problems. The Government is wacking this tax on the employer and not on the employee. The Minister keeps telling us that he would like the employer to cash it out, to make his employees pay this tax. But the Government has taken the easy way out because it knows the industrial problems that would arise if it put the tax where it should go-on the person receiving the benefit. The Government is not game to do it, so it has taken the easy option. It knows that the unions will not pay, so it has said: `We will make the employer pay'. It has taken the easy way out. The Minister has the hide to say in this place that the Government hopes that the employer will do the job for it and levy the tax where it should be levied-on the person receiving the benefit. It is a ridiculous situation. I again ask the Minister whether he will answer the questions which I have put to him and which he has not yet answered. Senator WALSH(Western Australia-Minister for Finance)(4.54) —I was not in the chamber when Senator Walters referred to clause 4, so I did not hear her remarks about it. Incidentally, for Senator Walters's information, although it was a general practice under the Income Tax Assessment Act for defaulters above a certain level to be named in the Parliament, that is no longer the case and it will not be the case with breaches of this legislation either. Individuals will not be named in the annual report of the Commissioner of Taxation. As to the honourable senator's hotchpotch of figures about farms in Tasmania, for a start, farmers do not get $2 a kilo for meat. If they were getting $2 a kilo they would be very much better off than they are. On the question of farm incomes, the honourable senator used the Bureau of Agricultural Economics figure for net farm income, which is not the same as taxable income. That is particularly important in respect of the changes in net farm income as defined by the BAE between last year and this year, because the average depreciation allowance, which is not cash outgoing at all but a tax write off for wheat farmers, is of the order of $27,000. So that figure is quite unreliable. A few people have said something about farms and a period of rural recession. I leave aside the land barons who have large numbers of employees, and are usually companies or millionaires of one form or another, of whom, I suppose, the President of the National Farmers Federation would be a prime example. That perhaps accounts for why he is making such a fuss about this. In this instance, as in so many others, he is speaking for himself rather than the people he purports to represent. Firstly, the majority of farms in Australia do not employ full time labour at all. Most of those which do, have one employee, and in a period of real stress that employee tends to get the sack. I have never noticed members of the National Party in particular or the Liberal Party weeping too many tears in the past for rural employees who got the sack either because of a drought or because of a severe economic recession in agriculture. The following is anecdotal, of course, but comes from a letter that I remember seeing a while ago from somebody in Victoria, a woman, I think, who was in partnership with her husband on a farm. She said that things had got so tough that they would have to sack their hired labour and work the farm themselves. I do not know what they were doing before that, as that was not stated, but that is one example of the sort of thing I have been saying: When there is severe economic stress in agriculture, many full time farm workers are put off anyway. That leaves aside, of course, the company farmers and the descendants of the old squattocracy. Again, Mr Chairman, I suggest that we get down to the real business of this Bill instead of having this silly grandstanding attempt, this exercise in self-flagellation, by members of the Liberal Party, who have picked yet another political lemon in going into bat on behalf of a minority of people who have been rorting the system over a number of years when they have the great majority of the public against them. They think they can pick up some political kudos on this matter, but they will pick up no more political kudos on this issue than they did when they so vociferously defended the free lunch. The CHAIRMAN —Order! I draw the Committee's attention again to the fact that we are considering clauses 1 to 8 of the Bill. The only actual fringe benefit before the Committee at the moment is the car benefit. Senator WALTERS —(Tasmania) (4.58)-I am speaking on administration. The CHAIRMAN —You are speaking on clause 4; you are quite in order. Senator WALTERS —Clause 4 says that the usual procedure will be carried out, but the Minister for Finance (Senator Walsh) says that the individuals will not be named. Can the Minister explain to me why the clause says: `. . . including any breaches or evasions of this Act of which the Commissioner has notice'? Can he tell me exactly why that wording is there if the Government does not intend to name individuals? Again, will the Minister answer the question I put previously, namely: Will that lilac book now have to be withdrawn and will another copy have to be sent out, following the passage of this legislation, with corrected figures? This is the third time that I have asked the Minister this question, and I would appreciate an answer. Senator WALSH(Western Australia-Minister for Finance)(4.59) —I do not know. Senator WALTERS —(Tasmania) (4.59)-Mr Chairman-- Senator Walsh —Come on, you silly old fowl! You are boring everybody. Senator WALTERS —Mr Chairman, if the Minister considers that he is bored, he had better go and get some other-- Senator Knowles —Mr Chairman, I raise a point of order. I think the Minister should be asked to withdraw the comment he made with respect to Senator Walters. It was disgraceful. Senator Walsh —Must I withdraw part of it or all of it? The CHAIRMAN —Order! Senator Walsh will withdraw. Senator Walsh —I withdraw. Senator WALTERS —It really is quite immaterial to me. We are so used to the Minister's foul mouth in this place. If the Minister is not able to tell us why clause 4 states that the Commissioner will furnish an annual report including any breaches or evasion of the Act of which the Commissioner has notice-the Minister has told us that people will not be named-he should send for someone who can answer the questions that the Committee is putting to him. I also ask the Minister to find out for me whether another lilac booklet will be sent out with the corrected figures. These are questions my constituents are asking me. I ought to be able to give them answers. I have said that I would ask these questions at the Committee stage of the debate on this Bill. If the Minister at the table cannot tell us the answers, he had better find them out and let the Australian people know what the Government intends to do. Senator WALSH(Western Australia-Minister for Finance)(5.01) —This tedium! Senator MacGibbon —Why do you not resign if it is all too much? I know it is intellectually taxing. Senator WALSH —It is not intellectually taxing; it is intellectually tedious. The Commissioner of Taxation will report breaches and so on of this provision, as he does with the Income Tax Assessment Act in general. I have already answered this question once. Perhaps I should speak slower and in monosyllables to get it through. It was the practice for the Commissioner to name in his annual report to the Parliament offenders who had evaded tax beyond a certain level-I think it was $18,000 or something like that. That is no longer the practice. However, with regard to the tax Act in general, the Commissioner, presents in his annual report to Parliament what one might call a summary of breaches of the Act evasions, and so on. He will do the same with this provision once it is put into law. On the question of another booklet-this is the level of trivia to which we have descended, thanks to Senator Walters-I would not expect that the Treasurer (Mr Keating) or the Taxation Commissioner will be circulating another booklet. I do not know precisely what he intends to do, but I will try to find out. Senator PARER(Queensland)(5.03) —When I made my remarks earlier the Minister for Finance (Senator Walsh) was out of the chamber, so I will speak on them briefly. The Minister has talked at great length about the cashing out of fringe benefits. It is pretty apparent that with regard to this legislation, the Minister is carrying the burden of someone else's mistake. He is doing that with some aggression, which is understandable. He has a fixation about salary packages which are contrived to avoid taxation. We are not talking about them, because their taxation is already provided for under the existing Act, and that provision could have been enforced. The question I wish to raise with the Minister relates to the cashing out of fringe benefits in three industries. To my mind, it is impossible for the people involved in these three industries to do that. First of all, I take the tourist industry. It is beyond me how someone in the tourist industry, particularly on an island tourist resort, could possibly cash out a fringe benefit. The second industry-again I will not repeat the detail I went into before-is the mining industry in remote areas, where I am sure many of the companies would like to cash out their fringe benefits, but are in a catch-22 position. Even if they were able to offer their houses at prices that their employees would pay, that in itself would be a fringe benefit. The rentals are worked out on a statutory formula which bears no relationship to the fact that, if the houses suddenly became vacant and were put on the open market, the companies would be lucky to get $5 a week for them. Yet my understanding is that the fringe benefits tax on the mining industry in the case of Queensland alone is in the order of $15m a year. The third area to which I referred was educational institutions and charities. Estimates of the effect of the tax have been made by various people in my State. In just one case alone-the Uniting Church of Queensland, which covers Lifeline and the Blue Nursing Service-it is estimated that the fringe benefits tax will cost in the order of $600,000. Bearing in mind that the tax is to be reckoned on the actual retail value of motor vehicles and not on the lower concessional price that applies to charities, the church claims that, as its only option and its only alternative is to get rid of its vehicles, in its own words: `This would break us'. I understand the Minister's comments with regard to cashing out, but I believe that it can be limited almost to those salary packages which were contrived to reduce tax. Senator MESSNER(South Australia)(5.05) —I return to the point made earlier by Senator Walters in connection with clause 4. I heard what the Minister for Finance said-that the administration of previous income tax legislation has been varied to exclude those who evaded tax below a certain level of income. I understand that is the point the Minister is making. I draw his attention to the absolute and categorical statement in sub-clause (2) of clause 4 which reads: The Minister shall cause a copy of a report furnished under sub-section (1)-- that is the sub-section which imposes the obligation on the Commissioner of Taxation to provide a report about breaches and evasions- to be laid before each House of the Parliament within 15 sitting days of that House after the day on which the Minister receives the report. It seems to me to be quite clear that, if a report is received by the Minister from the Commissioner on any breach or any evasion, that requirement cannot be avoided by the Minister without his breaking the law. It seems to me to be quite clear that he will be obliged to lodge the document in Parliament. May we have a clear answer as to what the Minister really intends? Senator KNOWLES(Western Australia)(5.07) —I ask the Minister for Finance (Senator Walsh): Considering the enormous bureaucratic control that has been placed on business with the requirement for quarterly returns, has the Government considered changing the quarterly returns to annual returns, as is the case in New Zealand, which has already gone through 12 months of this type of diabolical legislation? Senator WALSH(Western Australia-Minister for Finance)(5.08) —As an indication of the sort of paranoia that the Opposition is trying to whip up in this issue, Senator Messner sees something sinister in sub-clauses (1) and (2) of clause 4. Those clauses are identical to sub-sections (1) and (2) of section 14 of the principal Act. Senator Messner —You mean the income tax Act? Senator WALSH —Yes, the Income Tax Assessment Act 1936. With regard to Senator Parer's remarks on charities, I understand that when we get to the appropriate part of the Bill the Australian Democrats will be moving an amendment. The Government will accept that amendment. I also understand that the Opposition will move an amendment to apply the same exemptions as apply under section 23e of the principal Act. The Government will not accept that amendment because it has the potential to spread well beyond charities to educational and scientific institutions, and they are very much harder to define. I understand that the definition of charities which will be used refers to `public benevolent institution'. I think that is the relevant phrase. Senator Peter Baume —I think we have actually prepared that amendment; but it does not matter. We have done it together. Senator WALSH —The sheet I have still has notice of the Opposition moving an amendment which would have the same effect as section 23e. With regard to the other matters that Senator Parer raised, as the tax affects mining or, more accurately, mining in remote areas, the treatment in this regard is already highly concessional in that only a fraction of the expense which either has been claimed or would be claimed by the company as a deduction from its taxable income will be included for fringe benefits tax purposes, provided it is in a remote area. I think `remote area' is to be defined in the same way that it was defined by the previous Government. On tourism in remote areas, I presume that Senator Parer was talking about a situation on an island resort where there is no housing probably other than that which is owned by the developer of the resort and, if there is housing other than that, certainly no private rental market of any significance. If employers in those situations want to avoid the administration that will go with this tax I really do not see why they cannot take the same cashing-out option as anybody else and that is to charge the employee something like the true cost of provision of board and lodging, if that is what is being provided, and, if they feel obliged, to increase the wages to some extent as well. Sure, to the extent that that happens, that will increase overall costs. But the fact is that it is the abuse of what may have been, in isolation, quite reasonable arrangements in remote areas like that. The fact that that has spread rapidly to become commonplace, almost ubiquitous in the upper echelons of company management, has really left a responsible government with no option but to take the sort of action that we have. In regard to Senator Knowles's questions, the Bill proposes a system of annual assessments after the initial, transitional years. The instalments after the initial, transitional years will be based on the quarterly liability in the previous year which is very similar to the provisional tax arrangements which apply for self-employed taxpayers in general. Senator MESSNER(South Australia)(5.12) —The Minister has given us some kind of a reply to the questions concerning clause 4 where breaches and evasions occur but he has not in any way answered the point about the categorical requirement set out in sub-clause (2) which appears to make it mandatory upon-- Senator Walsh —It is exactly the same as in the principal Act. Senator MESSNER —That does not answer the question. Let me take the Minister's point. If this is exactly the same as it is in the Income Tax Assessment Act, how is it that the Commissioner of Taxation avoids providing information which the Minister, by law, is required to lodge in the Parliament? It appears to me, on a general reading of that clause, to be absolutely incapable of avoidance without a breach of the law. I would like to hear the Minister say that. In light of the fact that he is not prepared to give us any further answers on that, which seems to be fairly general in respect of other parts of the Bill, I would like to give notice that we will, at a later stage during the discussion on housing, and especially in relation to rural properties, be moving for the Government to defer further consideration of this legislation until we can get proper answers to these points. I remind the chamber that today, in Question Time, we got another set of confusing answers both here and in the House of Representatives from the Prime Minister (Mr Hawke), who admitted that he knew nothing about the effect of the fringe benefits tax on rural owners. That is absolutely amazing. At this late stage, some eight months after the initial tax proposals were announced, the Prime Minister of this country does not know that the fringe benefits tax will impact upon farmers. It takes a trip to Canowindra in central western New South Wales at the weekend for him to find out that very plain fact that has been made so clearly in this chamber and in the other place over the last several months. Senator Michael Baume —Button doesn't know the impact on cars. Senator MESSNER —Senator Button does not know its impact upon motor cars either. Just returning to the general point of cashing-up of benefits I would like to incorporate in Hansard a table which demonstrates the point that my colleagues have been making. This follows the very clear point that the Minister, Senator Walsh, was making, that it is the Government's intention to force employers to pay out in cash the value of the fringe benefits. If that is so, there will be a major incentive for employers to do that and obtain a tax deduction for the cost of that fringe benefit for the lowest paid workers, not for the highest paid workers. So that those employees who are at the lower end of the income scale who have some kind of fringe benefit, such as a house or a motor car to take home to save the company garaging costs, will find that the employers will put pressure on them to cash-up that benefit and they will receive that in the form of wages and, as a result, the employers will get a tax deduction for that tax which they would not otherwise have been able to get if they were paying the fringe benefits tax and the employees, when receiving that benefit, will then be paying the tax on that benefit. That will apply to most employees. If it is the Government's intention to try to catch those in the high income bracket, those with the executive fringe benefit packages and so on who are getting benefits paid for their children's education or who are getting free medical treatment and things of that kind-those in the 60 per cent plus tax bracket-there is far less incentive for the employer to cash-up those benefits and this little table which I wish to incorporate demonstrates that. The fact is that the employer will be paying tax for those high income earners who have fringe benefits while the low income earners will end up paying the tax directly when the employers do what the Government requires, that is, cash-up the benefits. Senator Michael Baume —Lower income earners will have to bear it. Senator MESSNER —The lower income earners will suffer. It just shows how unprepared this Government is when the Prime Minister admits today that he did not know that farmers were going to be affected by the fringe benefits tax. This is incredible at this late stage. I seek leave to incorporate in Hansard this table which sets out the facts. Leave granted. The table read as follows- THE EMPLOYER'S INCENTIVE TO `CASH-OUT' FRINGE BENEFITS Employer paying F.B.T. on $1,000 benefit Value of fringe benefit... $1,000 cost of F.B.T.... 490 Gross Cost... 1,490 less tax saving on F.B. at coy. rate... 490 Net Cost... $1,000 Employer `Cashing-Out' Benefit of $1,000 Employee's Rate of Tax... 29% 43% 55% Net Fringe Benefit... 1,000 1,000 1,000 Gross Cost to Employer... 1,408 1,754 2,222 +25% On Costs... 352 438 555 Cost to Employer> 1,760 2,192 2,777 -Tax Saving at coy. rate (49%)... 862 1,074 1,361 898 1,118 1,416 Net Cost to Employer... 1,000 1,000 1,000 Benefit of `Cashing-Out'... +102 -118 -416 Senator MESSNER —I thank the chamber. The final thing I wish to mention to the Minister is that in the paper on the reform of the taxation scheme that was delivered in the Parliament by the Treasurer (Mr Keating) back on 19 September last year the Government, on the question of the cashing-up of benefits said on page 8 of its speech: The Government will consult with employers and the ACTU about possible adjustments to the wage fixing principles to provide for such `cashing-out' of benefits under appropriate conditions. The point is obvious. If cashing-out is to be the policy and the Government is pushing employers and the unions to agree to new cashing-up proposals, I would like to know, since it is now eight months after that announcement was first made, what progress has been made in determining new wage fixation principles so that that can proceed? Have there been any discussions with employers and with the Australian Council of Trade Unions on that matter? If so, have the Minister and the Government drawn to the attention of the ACTU the effect upon employees, particularly lowly paid employees, of the new tax as it will transfer to the employees via the cashing-up process? I would like to know what response the Minister has had from the ACTU and also from employers about that. Senator BROWNHILL(New South Wales)(5.19) —I would like to ask the Minister for Finance, Senator Walsh, two questions about the letter that went out with the purple booklet and the request for employer information. I have had a lot of complaints from people in the community, the employers, about the implications of this. I quote from the letter, which states: Dear Employer, From 1 July a new system of taxing benefits provided to employees by employers will be introduced. The letter goes on to state: The Fringe Benefits Tax is an integral part of the Government's tax reform package. I ask the Minister two questions: Firstly, does this not usurp the right of the Senate either to pass or not to pass legislation because the letter went out before it had been finally debated? Secondly, does it also carry with it some implications of policy matters? That is the letter that went out with the purple booklet. Senator WALTERS(Tasmania)(5.22) —Could the Minister for Finance also tell me what the Government has assessed will be the cost to the community at large? What will be the rate of inflation as a result of this tax? The Hydro-Electric Commission has informed me that it will certainly be putting up the charges in Tasmania because the cost to it will be over $1m. As such it has nowhere else to go but on to the electricity bills of the Tasmanian people. Can the Minister tell me what the increase in the inflation rate will be? Senator Brownhill referred to the letter that was sent out with the lilac book. What is the obligation for people to fill that in? Senator WALSH(Western Australia-Minister for Finance)(5.23) —I am not going to indulge in silly guessing games about the alleged inflationary effects of something because it remains to be demonstrated whether there will be any at all. Senator Walters can think of any figure that she likes, double it, add a couple of noughts and then run with it and it will be about as credible as most of the things that she runs with. As for the Hydro-Electric Commission, if it does cost $1m-I am certainly not accepting that figure as being correct-that will be pretty insignificant compared with the cost of the surplus capacity which the Hydro-Electric Commission insists on supplying. I want to blow two myths out of the water. As to this humbug, this pseudo concern, about the effects on lowly paid workers, the plain fact is that lowly paid workers do not get these sorts of fringe benefits. Senator Boswell —They do. What about rural workers? Senator WALSH —Senator Boswell is boasting about rural workers being lowly paid. I want that to be noted for the record. He obviously approves of that, although he purports to represent them. The sorts of fringe benefits that lowly paid workers get-for instance being able to take home a packet of Weeties from Coles at a 10 per cent discount or whatever the prevailing practice is, a practice which has been around for a very long time and nobody has been particularly worried about it-are covered under the exemption provisions of the legislation. I think a benefit to the extent of $300 is not affected, so we can forget about them. The majority of farmers do not have farm employees at all, so they are not going to be affected. In fact, about three-quarters of the farmers do not have full time employees and therefore they will not be affected by it. The Opposition is going in to bat for perhaps a handful of people who can be generally regarded as farmers and who are very big farmers, such as the President of the National Farmers Federation, who has in this instance, as he has on other occasions, abused his position as President of the National Farmers Federation. He is running very hard on issues which are irrelevant to the people he purports to represent but are highly relevant to the people he really represents, such as the corporate raider, Elders-IXL, and its ilk. So there is no genuine concern by the Opposition for either the great majority of farmers or the lowly paid workers. In regard to the obligation to answer the letter which Senator Brownhill asked about, there is no mandatory requirement for the letter to be answered. The Commissioner of Taxation was, I suppose, committing what would be the heinous sin in the eyes of the Opposition of actually trying to inform the public of what was going on, whereas the Opposition has both a vested interest in and a long-standing record of misinformation of the public. As for pre-empting the Parliament, that is just so much more Ku Klux Klan type rhetoric or redneck rhetoric-the sort of twaddle, lies and nonsense which the National Party when it gets out among its own cheer squad is so fond of peddling, particularly in Queensland and to a somewhat lesser extent in New South Wales. I think honourable senators will agree that the southern States seem to be a little bit more sophisticated than that. Senator Boswell —Mr Temporary Chairman, I raise a point of order. The Minister has made reference to the National Party in derogatory terms. The word `lies' is unparliamentary. It is untruthful in this case. The National Party never lies. It does represent the rural people. I totally object to the Minister's reference to the National Party. Mr Temporary Chairman, I ask you to ask him to withdraw it. The TEMPORARY CHAIRMAN(Senator MacGibbon) —Order! There is no point of order. Senator WALSH —I do have a note here which comes from the Treasurer's office but I assume it comes ultimately from the Australian Taxation Office. It is on the cost of the fringe benefits package booklet and letter. It indicates that not all the accounts have been paid, so nobody knows for sure. The cost of the contents are of the order of $220,000 and the distribution costs are $250,000. Senator WALTERS(Tasmania)(5.26) —Will the Minister answer the question I asked him? Senator Walsh —What question? Senator WALTERS —The Minister should make a note when we are asking questions so that he remembers them. Can he tell me what obligation there is on the employer receiving the letter attached to the lilac booklet to fill in the form? Senator Walsh —I told you that-none. Were you not listening? Senator WALTERS —There is no legal obligation at all for employers to fill in the form? Senator Walsh —I told you that it was not mandatory. If you don't understand what that means, I apologise. I will try to speak in monosyllables. Senator WALTERS —Fine. I was talking about the rural community and mentioned meat. The Minister said the farmer does not get $2 a kilo for his meat. I thought that was at market prices. Am I incorrect in that? Senator Walsh —It is not the market price on the farm, but a fraction of that. Senator WALTERS —Is it the market price on the farm or the market price in the shops? Senator Walsh —The lowest price that the farmer gets. Senator WALTERS —Fine. So it is the market price that the farmer gets. I thank the Minister for that information. Senator MESSNER(South Australia)(5.27) —The Minister did not answer the question I raised in connection with the statement by the Treasurer (Mr Keating) last September that the Government was to negotiate with the Australian Council of Trade Unions and employers on wage fixation. Senator WALSH(Western Australia-Minister for Finance)(5.27) —To my knowledge that has not happened, but I will have it checked with the Treasurer. Senator BOSWELL(Queensland)(5.28) —I would like to raise a matter that concerns every senator on this side of the House as we are representatives of our States. I point out to the Minister for Finance that Premiers Bannon, Burke and Bjelke-Petersen have said they will be having great difficulty in meeting fringe benefits tax payments on the houses provided for policemen, teachers, hospital workers and public servants. It will cost the Queensland Government alone approximately $80m to $100m. All other States, both Labor and Liberal, will have the same difficulties. I ask the Minister: Will there be any reimbursement to the States to offset this additional $100m-- Senator Siddons —Mr Temporary Chairman, I raise a point of order. We have been debating the initial clauses of the Bill at great length. The Opposition's questions have ranged over various matters, many of which are addressed in specific clauses of the Bill. If we are going to have general questions without addressing specific clauses, I suggest that the debate will go on forever. I would like to have your ruling on that matter. The TEMPORARY CHAIRMAN(Senator MacGibbon) —I was just about to make a ruling. We are dealing with clauses 1 to 8 and the general provisions of the the Bill. Senator Boswell, I rule that the point you are raising with respect to accommodation comes up under Division 6, which will be dealt with later. Question put: That the clauses stand as printed. The Committee divided. (The Chairman-Senator D. J. Hamer) Ayes . . . . . . . . . . . 36 Noes . . . . . . . . . . . 29 —— Majority . . . . . . . . . 7 —— Aulich, T. McIntosh, G. D. (Teller)Black, J. R. McKiernan, J. P. Chipp, D. L. Macklin, M. J. Coates, J. Maguire, G. R. Colston, M. A. Mason, C. V. J. Cook, P. F. S. Morris, J. Cooney, B. Ray, RobertCrowley, R. A. Reynolds, M. Devlin, R. Richardson, G. F. Elstob, R. C. Robertson, E. A. Evans, Gareth Ryan, S. M. Foreman, D. J. Sanders, N. K. Gietzelt, A. T. Sibraa, K. W. Giles, P. J. Siddons, J. R. Grimes, D. J. Tate, M. C. Haines, J. Vigor, D. B. Jones, G. N. Walsh, P. A. McClelland, Douglas Zakharov, A. O. Alston, R. K. R. Lewis, A. W. R. Archer, B. R. MacGibbon, D. J. Baume, Peter Messner, A. J. Bjelke-Petersen, F. I. Newman, J. M. Boswell, R. L. D. Parer, W. R. Brownhill, D. G. C. Puplick, C. J. G. Carrick, Sir John Reid, M. E. Chaney, F. M. Sheil, G. (Teller)Collard, S. J. Teague, B. C. Crichton-Browne, N. A. Townley, M. Durack, P. D. Vanstone, A. E. Guilfoyle, Dame Margaret Walters, M. S. Hamer, D. J. Watson, J. O. W. Hill, R. Withers, R. G. Knowles, S. C. Childs, B. K. Kilgariff, B. F. Coleman, R. N. Jessop, D. S. Bolkus, N. Short, J. R. Button, J. N. Baume, Michael Question so resolved in the affirmative. Clause 9 (Taxable value of car fringe benefits-statutory formula). Senator SIDDONS(Victoria)(5.36) —I move: Page 7, paragraph 9 (2) (c), lines 15 to 31, leave out the paragraph, insert the following paragraph: ``(c) the statutory fraction is- (i) in the case of the transitional year of tax- (a) where the annualised number of whole kilometres travelled by the car during the year of tax was more than 30,000-0.045; (b) where the annualised number of whole kilometres travelled by the car during the year of tax was not less than 18,750 and not more than 30,000-0.075; (c) where the annualised number of whole kilometres travelled by the car during the year of tax was not less than 11,250 and not more than 18,749-0.135; or (d) in any other case-0.18; and (ii) in relation to a standard year of tax- (a) where the annualised number of whole kilometres travelled by the car during the year of tax was more than 40,000-0.06; (b) where the annualised number of whole kilometres travelled by the car during the year of tax was not less than 25,000 and not more than 40,000-0.1; (c) where the whole annualised number of whole kilometres travelled by the car during the year of tax was not less than 15,000 and not more than 24,999-0.18; or (d) in any other case-0.24;''. This is arguably the most important part of the fringe benefits tax legislation. A major portion of the revenue the Government intends to raise will come from the fringe benefits tax on company cars. Of the total $540m foreshadowed by the Government, $370m was estimated to be gathered from the taxing of company cars. When the Australian Democrats discussed the whole tax package with the Government late last year, we agreed to pass the fringe benefits tax legislation including the taxing of company cars principally on the basis of very substantial concessions the Government made to the Democrats, particularly the promise that it would deliver the tax cuts. We have stuck to our bargain. We have stuck to the arrangement to which we came with the Government. We support the fringe benefits taxation but we do so with some very important amendments. The Government claimed that it was going to raise $370m from the taxing of company cars. It became very obvious to us-as a result of approaches by the motor car industry itself, by the dealers and distributors, and by the car unions-that this tax would raise much more money than the Government had estimated, and that between 10,000 to 20,000 jobs were at stake. We looked into the government figures very carefully, and we found wide discrepancies. For instance, the industry, as a result of surveys, said that something like 550,000 motor cars would be subject to this Tax. The Government had estimated that the revenue would come from something like 470,000 motor cars. The industry, the unions, and the distributors had done their homework. As a result of the surveys which we studied carefully there was very little doubt in our mind that at least 550,000 motor cars would be involved. We said that even if we take an average of the two figures we would still have a figure of something like 500,000 motor cars. We looked into other aspects of the Government's assessments. For instance, there was a difference of something like $100m between what the industry and what the Government said in relation to how many cars would be garaged over the weekends; and so it went on. After much argument, after much negotiation and after the weight of the evidence that was on our side, the Government has finally, as I understand it, agreed to support the amendment that I have just moved on behalf of the Democrats. Initially, in a full year the Government planned to levy a tax on 24 per cent, 16 per cent and 8 per cent of the value of a motor car, depending on the distance that that car travelled in each year. Our amendment is as follows: On a car that travels less than 15,000 kilometres per year, the tax will be levied on 24 per cent of the total value of the motor car; on a car travelling between 25,000 and 40,000 kilometres per year, the tax will be levied on 10 per cent of the value of the motor car; and for cars travelling over 40,000 kilometres per year, the tax will be levied on 6 per cent of the value of the motor car. The new tax will result in a significant drop in the burden of tax on company cars. There is no doubt that the Australian Democrats will have won a very significant victory if the amendment is passed. On the arithmetic of the calculation alone, there is no doubt that employers will be saved at least $200m a year. That calculation is beyond dispute. The facts of the matters are simply these: The Government has come up with figures that are not realistic. If we take the surveyed figures-the realistic figures-there is little doubt that the Government would be raising $570m, not the $370m that it estimates it will be raising. The difference between those two figures is $200m. I am afraid that the Democrats are getting very tired of hearing from the Opposition that the concessions that we have wrung from the Government are of a minor nature. We are also getting very tired of reading about that in the Press. The fact of the matter is that the reduction in the percentages of tax on motor cars was put before the Government on no less than three occasions by the Minister for Industry, Technology and Commerce (Senator Button) and on three occasions the Cabinet refused to agree to them. The industry itself made innumerable approaches to the Government to get the fringe benefit tax on motor cars reduced. The Government stood steadfast and said: `No, our figures are right and this is what we are going to do'. It was not until the Democrats took up the cause and pushed the logic of the position that had been taken up by two Labor State governments, by all sections of the manufacturing industry, by the distribution industry, by the Australian Council of Trade Unions and the motor car unions that the Government conceded. We pushed the position with which all sections of the car industry were in complete agreement. I repeat that the concession is $200m. If the concession that the Democrats have wrung from the Government is minor, I would like to know what a major one is. The $200m concession is an indisputable fact. One only has to multiply the figures. It does not sound much when one talks about a three, four or five percentage reduction. However, if one multiplies that reduction over the number of motor cars involved, one can see that the concession which has been conceded by the Government, assuming that the Government agrees to our amendment now before the Committee, will reduce the estimated revenue by $200m. One might wonder how the Government can possibly go ahead with the tax cuts if it is going to lose $200m. The dispute is over the base statistics-that is, how many cars are involved. We say that 500,000 motor cars are involved; the Government says that a considerably lesser number is involved. We are prepared to have another look at this matter if our figures are wrong over a period of 12 months or thereabouts. In the meantime, the arithmetic shows that employers will be saved $200m in respect of the tax on motor cars. This is in fact a victory of the philosophy of industry development over a doctrinaire economic rationalist approach by the Treasury. The Democrats have been engaged in long hours of negotiation between all sectors of the industry. Our amendment represents the consensus of opinion of all sections of the industry. The four major motor car manufacturers-namely, General Motors-Holdens Ltd, Ford Motor Co. of Australia Ltd, Mitsubishi Motors Australia Ltd and Toyota-all agree that the amendments will save between 10,000 and 20,000 jobs. How can the Opposition possibly say that the saving of 10,000 to 20,000 jobs is a minor concession by the Government? It is a major victory for negotiation; it is a major victory for commonsense. It is something that required enormous effort on the part of the Democrats. Perhaps honourable senators can understand why we feel a little touchy on this matter when we are repeatedly accused of winning minor concessions. I commend this amendment to the Committee. I hope that commonsense will prevail and that the amendment will be agreed to by the Government. Senator MESSNER(South Australia)(5.46) —The Opposition will not be opposing the amendment that is proposed by the Australian Democrats. However, I wish that the Democrats would save us the humbug of their posturing in this place about how they have saved the car industry. They have given the car industry a choice: Instead of shooting itself with a .387 magnum, it can do it with a .303 rifle. That is the kind of difference they have made to this legislation which, without a doubt, will still have a devastating impact on the motor vehicle industry. I speak particularly of the impact upon my own State of South Australia and, of course, the motor vehicle industry which is centred there. Whatever the outcome of the particular measures that are put forward in this legislation, it is quite clear that the Government of South Australia and the Vehicle Builders Union of South Australia are still conducting a massive campaign of resistance against this tax because they know quite simply that there are jobs on the line in the car industry as a result of this new tax. Try as they may, whether the Democrats think that they have saved the nation, saved jobs in South Australia or the motor vehicle industry, they will fail because the jobs are going to go west as a result of this measure. Whether or not Senator Siddons is prepared to admit this, it certainly is true. The Government of South Australia says that, Mr Bannon the Labor Premier of South Australia says that and so does the Vehicle Builders Union in that State. That is quite independent of what the Opposition is saying. Our estimates, of course, are similar. However, the fact is that we do not rely on our own information; we rely on information from alternative, so-called independent sources which apparently the Democrats are not prepared to heed. I think it is amazing that in a State like South Australia, which has such a narrow industrial base and which relies so heavily upon the motor vehicle industry and the associated componentry industry, the two Democrat senators elected by the people of South Australia are not prepared to stand up in the Senate and oppose this legislation with the Liberal Party and the National Party of Australia. Senator Walters —They are not even in the chamber. Senator MESSNER —I did not notice them during the earlier debate on this matter and consequently one is drawn to the conclusion that they are ashamed to stand in this place and defend their own position. The fact is that the Democrats, including Senator Haines and Senator Vigor, have let down South Australia and they will pay the price at the ballot box as a result. Another issue is of major concern. Quite apart from the jobs issue, which clearly is going to have a dramatic impact upon the industrial development of South Australia, there are associated indirect effects. Senator Michael Baume, when speaking in the second reading debate on this Bill, drew attention to the effect on the steel industry as a result of fewer cars being sold. The estimates are as high as 90,000 fewer cars being sold as a result of this new tax. Less steel will be sold in the community; consequently, the industries based in Wollongong and Port Kembla will suffer. Senator Baume told us the other day that sheet metal production would be reduced by 20 per cent as a result of the car industry losing sales caused by this tax. That is a huge reduction in the production of sheet steel, which will have a dramatic impact on Australia, especially on those parts already depressed and still trying to come out of the recessions of earlier years. That is something which this Government appears to ignore and about which it is not concerned. I make one other point in respect of the Democrats. They have postured that they have produced results and have somehow scaled down the impact of this tax. The only reason Senator Siddons has been able to achieve anything at all, small as it is, in seeking to get the Government to change its mind, is that the Liberal and National parties have stood firm in opposition to this tax all the way down the line. That is the only reason the Democrats have been able to play the middle ground and to seek some kind of compromise which in the end will have no positive effect whatsoever. If they try to make heroes of themselves, they will fail absolutely. They should join in opposing this legislation to get rid of the tax altogether. The Democrats know that it is horrendous and wrong. One of the major arguments that the Democrats have put forward in terms of their own position is that somehow this legislation will save everybody in the community a lot of tax. They have said that the Government's commitment to giving tax cuts this year and next year, which will total some $4,500m, will be financed by this puny fringe benefits tax. Nothing could be further from the truth. In fact, only $1 in $6 which will be saved as a result of the tax cuts, if they come into force, will come from the fringe benefits tax. Senator Siddons —Don't you trust the word of the Prime Minister? Senator MESSNER —Trust the Prime Minister (Mr Hawke), he says! The Prime Minister went to central and western New South Wales this weekend and did not even know, apparently, until that time that the farmers will be charged the fringe benefits tax upon their residential accommodation. That is how much we trust the Prime Minister in these matters. He does not even understand the issues involved. He goes around parading as somebody in favour of taxation reform, yet fails to understand the impact of the very solutions he is putting forward, which of course are utter failures. Let us not have any more humbug from the Democrats about how the tax cuts are being preserved as a result of their measures. The people of Australia cannot and should not be misled by this cheap statement that those cuts are being preserved. They are not, because the effect of the fringe benefits tax will be more devastating in its job destruction potential than in delivering extra revenue to provide tax cuts. During the first stage of the debate on this matter we made it quite clear that the Government's intention to force employers to cash up benefits will lead to the lowest paid employees paying the tax, while the highest paid employees will be able to avoid the tax. The Democrats' nonsense about somehow bringing this new equitable scheme into place is totally wrong. If the Democrats have convinced themselves about that, hopefully they will come to some conversion on this at a later stage. I suggest that that later stage will occur at the next election when they lose seats in South Australia and Victoria as a result of putting up candidates who have defended such an outrageous proposition as this fringe benefits tax. Quite apart from the argument that has been put about the value of the taxes to be collected-various estimates have been given of $370m or $500m; the numbers are mind-boggling in terms of the number of noughts they have-let us try to understand that the tax is being imposed by the Government at a time when the economy is quite obviously going down the tube. We are now in official recession and we face jobs losses in industries anyway, yet the Government persists with a measure which has the great potential of destroying even more jobs. Various estimates have been made of the amount of tax that will be collected as a result of this legislation, and a figure has been mentioned by Senator Siddons. I received just a few minutes ago an estimate of the cost of the Democrats' proposals for the changes in the car benefits tax. That proposal is supposed to be saving the car industry, but estimates show that the Government, after the implementation of these proposals, will reap a harvest of $620m in tax-far more than was estimated by the Democrats. I understand that the Democrats have entered into a deal with the Government whereby, if the revenue falls below the Government's minimum level, they will allow the passage of further legislation to impose further taxes on the country to make up the difference. That is the deal these wonderful Democrats have done for the Australian people! They have provided a means for the Government to ensure that it can impose a further tax on the people. That is the Democrats' solution. Following the logic of Senator Siddon's argument, if the figure turns out to be higher than the estimates which have been produced, along the lines I have just mentioned, and is in fact $620m, will Senator Siddons agree to provide a tax cut for the excess? Senator Siddons —That figure you pulled out of the air has no foundation in any survey at all. The fact is that these amendments will save $200m. Senator MESSNER —These figures have been produced by an important body, the Victorian Automobile Chamber of Commerce. That body has important information about the car industry, as Senator Siddons no doubt would know, as it comes from his State of Victoria. This information demonstrates that all Senator Siddons is saying is nonsense and that in the end the measures Senator Siddons is seeking to put in place will be of very little value to the people of Australia. Senator Macklin —Which firm did it? Senator MESSNER —The Victorian Automobile Chamber of Commerce. Senator Macklin —It did it itself? Senator MESSNER —Yes. I conclude where I started, on the question of the car industry. It is clear that jobs are at stake in that industry. It has been estimated by the South Australian Government, the Premier of South Australia, Mr John Bannon, and the South Australian branch of the Vehicle Builders Union that some 4,500 jobs will be lost in South Australia. Although the figure may not be that high if the revenue does not reach the figure predicted, the fact is that a significant number of jobs will be lost in my State. I oppose the tax on that ground alone. The Liberal and National parties oppose this legislation as well. I make the point absolutely clearly that the Liberal and National parties, upon re-election to government, which I hope will be as soon as possible, will repeal this legislation and will provide more opportunities in Australia. Senator TEAGUE(South Australia)(6.00) —I follow my colleague Senator Messner in speaking about the effect that this measure will have on unemployment in South Australia. The fringe benefits tax will have a devastating effect on South Australia. With great reluctance, I make the observation that, even though many honourable senators describe the Senate as the States House, only the Liberal senators of the South Australian senators are opposing this measure which will have a discriminating effect upon South Australia. The Vehicle Builders Union in my State is loudly and clearly opposed to this measure. The State Opposition, led by John Olsen, is vehemently opposed to this measure. The Premier of South Australia and his colleagues in the State Labor Cabinet, are vehemently opposed to this measure. I lament the fact that, instead of all South Australian senators taking up that united cry of the most informed and responsible groups within our State, only the South Australian Liberal Senators are representing that view in this debate. The Labor senators from South Australia have yielded to the view of the Prime Minister, Mr Hawke, and the view of Caucus. Senator Foreman is a former secretary of the Vehicle Builders Union. It does not require a great exercise of imagination for us to know what lobbying he may have done in the background to try to get this tax completely abolished. But we do not hear a word from him in the Senate, which many of us have described as the States House, which protects the States we represent. In this case a clear position of total opposition to this tax has been adopted by Senator Foreman's closest colleagues in my State. But he is silent. I refer especially to the two Australian Democrat senators from South Australia, Senator Haines and Senator Vigor. They are not involved in this debate. They are not present while this odious measure is being debated. They are not here to put a view on behalf of the Democrats, because I believe they are locked into the shoddy compromise that has been worked out in a back room by representatives of the Democrats and the Hawke Labor Government. So even though many of us from time to time will refer to the Senate as a States House, this a clear example of a lack of unanimity amongst honourable senators from South Australia on a matter which has such direct, discriminatory effects on my State. Various estimates have been made as to the amount of tax that will be raised as a result of this measure. A figure of $500m has been mentioned. Senator Messner has just received from the Automobile Chamber of Commerce an estimate that it could be $650m. But in South Australia the car industry has enormous capital and resource commitments in General Motors-Holden's Ltd, Mitsubishi Australia Ltd and the automotive component industry. For 40 years South Australia has been a major centre for the car industry, in the same way that it is distinctively a centre for the grape, wine and brandy industry. When the Government contrives to introduce measures against an industry as a whole which is predominantly concentrated in one State, I still believe it is appropriate for all honourable senators from that State to make it very clear that the measure will have a disproportionate effect on their State. We have done this in the past with regard to some other measures. I refer to measures affecting South Australians, such as water quality and quantity in the River Murray. But in regard to a measure such as this, I am profoundly disappointed, as a person who believes in the Senate and in the role of honourable senators representing their own States, that only Liberal senators of the South Australian senators are opposing this measure which will put thousands of South Australians out of employment, which will have a tragic effect upon their own and their families' fortunes. Whilst making this general lament, I believe that the people of South Australia should know and evaluate the actions of the Democrat senators from South Australia who have so lamentably let down South Australians. When the next election comes around, Senator Haines and Senator Vigor will seek to put forward their credentials for re-election. I believe South Australians should remember this day and this debate, when those honourable senators did not oppose this measure which will have such a devastating effect on South Australia. They did not even come into the chamber to listen to the debate and they are not prepared to put forward their own views on the measure. They may have private views on it. If they vote against it, they will swell the Liberal and National Party numbers to ensure its defeat. I believe those honourable senators are neglecting their duty by not putting their view on this measure, which will have a devastating effect on the car industry and on employment in South Australia. Senator WALTERS(Tasmania)(6.07) —We heard Senator Siddons-by the way, he is not present at the moment; he has moved his amendment and is no longer here-say that the deal done with the Government was considered by the car industry as a whole as saving it an enormous amount of money. Yet the Australian Democrats, I believe, received 25 metres of telexes before their staff turned off the telex machines. They could not bear to receive any more telexes, telling them how much support they lacked in the community. I guess most of that lack of support would have been from the motor industry in South Australia. Senator Siddons also told us that he has a deal in writing with the Prime Minister (Mr Hawke). He then asked: `Don't we believe the Prime Minister's word? Wouldn't we take the Prime Minister's word?'. Yet he has been forced to seek the Prime Minister's word in writing, instead of seeking a verbal promise, such as the promise that we all heard during the election campaign when the Prime Minister said: `In words that even the Opposition can understand, there will be no capital gains tax'. The Australian Democrats wonder why we are not prepared to accept the Prime Minister's word. We will never accept the Prime Minister's word. We do not pass legislation on the basis of the Prime Minister's word. The way in which the Democrats do so has earned the criticism of every editorial across the country. Every editorial across the country has criticised the integrity of the Democrats. It is dishonest to talk only about the car industry while every single small business, farmer and individual will be paying the price of this fringe benefits tax. We have seen an open letter to Senator Chipp, signed by D. G. Mactaggart. He put it pretty clearly when he stated: This Country can no longer afford the luxury of having Senators, who have been elected by some 5 per cent of electors, controlling the destiny of the rest of the population. Even the most lowly of the Democrats has responsibility for shadowing seven portfolios. Is it any wonder that they do not look in any depth at the legislation that is now before the Committee? Senator Siddons has said that the measure as it affects the car industry is the only part of this legislation-the most important part-that needs to be debated. He is far from concerned about the way in which this will affect other small businesses. All big businesses can pass on their costs. We will all pay higher air fares because this tax will be passed on. Sir Peter Abeles has told his staff that he will pay fringe benefits tax and therefore they should not worry. But he will not pay them out of his pocket; we will all get the costs on our air tickets. The people of Australia will then know why their air fares have gone up. Indeed, it has already been announced that air fares will go up and part of the reason for that is the fringe benefits tax. Now that a deal that has been done between the Australian Democrats and the Government, can the Minister give an undertaking that the tax cuts will come through on time? I do not know whether the Minister would bother putting his word in writing, but at least we would have it recorded in Hansard. Senator WALSH(Western Australia-Minister for Finance)(6.11) —I think it is fairly well known-but perhaps I should put it on the record officially-that the Government will accept the amendment moved by the Australian Democrats. We believe that it is based largely on a misconception, but we will accept it because it is important that the Bill as a whole be retained. I wish to make a few other brief comments. I have noted that both Senator Messner and Senator Teague have identified themselves with delegates from the Vehicle Builders Union. I did not know that that was part of their role as Liberal Party senators, but that is what they say and I accept their word for it. They are controlled by the VBU. Senator Messner went into his usual tirade of prophecies of catastrophes which would follow the introduction of this tax and forecasts of 90,000 tonnes less steel being used and so on. I remember the same honourable senator asserting two years ago that a wine tax of 10 per cent would induce a 14 per cent decline in sales. I have not looked at the figures for a couple of months, but the last time I looked, wine sales were increasing at about the same rate as they had increased in previous years. The only logical conclusion one can draw from that is that the 10 per cent sales tax on wine has had no effect on consumption. But logic never has been the strong point of the Liberal Party of Australia or the Opposition in general. Senator Maguire —He also voted for the brandy excise in 1978 which devastated the South Australian brandy industry. Senator WALSH —He voted for a brandy excise in 1978, did he? So he is highly selective about whether he stands up for South Australian interests or does not. It depends on whether he is an opportunist in opposition or a toady in government. Senator Messner has misrepresented the facts. What the Opposition threatened to do and what it says it would have done, had it had the numbers, was torpedo the entire tax reform package and the revenue gained from it. The original estimates were $976m and that amount has been watered down somewhat but the current estimates are that something like $800m in the next financial year will accrue as a result of the tax reform package. The total cost of the tax cuts is of the order of $2 billion, so it is not a one in six ratio, as Senator Messner asserts; it is a ratio of 4:10, which is a great deal different from one in six. In the next year, because of the delayed revenue effect of a number of individual components of the tax package, the revenue gains would be significantly higher. Senator Walters is so tiresome but I suppose that if I do not answer her now she will only get up and talk again. I will give a guarantee-as the Prime Minister (Mr Hawke) has already done-that the tax cuts forecast in the Treasurer's statement last year will be introduced in 1986. Senator BROWNHILL(New South Wales)(6.15) —I wish to make a couple of points about the statutory formula and the fact that I believe it is discriminatory. I do not believe that the Australian Democrats' objectives will be achieved by this amendment. I give an example of two directors of a company with offices in, say, Martin Place, Sydney. Both have cars worth about $30,000. The first director lives at Darling Point and he drives his car to and from work each day. He is likely to clock up something like 12,000 kilometres each year. The second director lives in Bowral and he drives his car to and from work each day. He is likely to clock up something like 50,000 kilometres each year. Basically both directors travel the same number of kilometres in their cars for private purposes. Under the statutory formula, the first director would be eligible for assessment at 24 per cent, which would be $7,200, and the tax would be 49 per cent of that sum. However, the second director would only be eligible for assessment on $2,400-and under the Democrats' proposal about $1,800-at the rate of 6 per cent. The assumption made by both the Government and the Democrats is that the further one drives one's car, the more likely it is to be for business purposes. I think the above example shows clearly that this is not necessarily so. In my example, the director living close to work is penalised much more than the director who chooses to live elsewhere. Where is the fairness in that? Senator WALSH(Western Australia-Minister for Finance)(6.17) —The statutory formula is a concession insofar as anyone who chooses not to use it and believes that it treats him more harshly than it should has the option of using a log book and recording the actual number of kilometres travelled. The formula is loaded in favour of the taxpayer because if one is to be taxed on a more than proportional private use under the statutory formula, one has that alternative. If one is taxed less than proportionally under the statutory formula, that is something one gets away with. The only alternative to some sort of statutory formula is to make it mandatory for everyone to keep a log book, which would be demanding of resources in both the private and public sectors. However, from the Opposition's point of view it would have this advantage: The false assertions that the Opposition is making-or at least the Opposition in Western Australia and particularly its State leader, Mr Hassell, who asserts that it is compulsory for everyone to keep a log book-would be true. We chose not to do that, so the Opposition is not telling the truth. Senator MESSNER(South Australia)(6.18) —While we are on the subject of motor vehicles, may I ask the Minister about farm vehicles where there is some short term and fairly limited use for private purposes? I instance the situation in which a farm vehicle is used almost exclusively for running around the paddocks, picking up hay and delivering fencing materials, but on the odd occasion is used to go to town to pick up parts and accessories or supplies from the factory for the farm-- Senator Macklin —That is business. Senator MESSNER —Let me finish the example. At the same time the farmer takes his wife into town and she goes to have her hair done at the local hairdressing salon and to the local supermarket to buy some groceries for home use. In that situation it seems to me that the car is definitely being used for both business and private purposes. As I read the Bill, this test does not draw distinctions as to the dominant or principal purpose attributable to the use of any vehicle. I may be misreading the legislation because it is so complicated that it is very difficult to get any clear impression. If that assumption is right and there is no test about dominant or principal use, it means if there is any use for private purposes, the car becomes liable for the application of the fringe benefits tax. That is notwithstanding the fact that most of the actual use of the vehicle will be for business or farm purposes. That also means, of course, that proper records would need to be kept on a log book basis in order to keep track of the use of those vehicles for various purposes. I also raise the case of vehicles used to take children off the farm property and on to the road to a bus stop at some point or another each day and then to pick them up afterwards. The farm vehicle would be almost 100 per cent used for farm business except in the circumstances that I have just mentioned. Senator WALSH(Western Australia-Minister for Finance)(6.21) —Apparently the rules have changed since I was familiar with them. The use of a farmer's own vehicle-say, a motor car-will be deemed to be one-third business and two-thirds private. If a farmer chooses to substantiate the travel and can establish that more than one-third of it was for business, that substantiated portion is the one that will be used. In the case of driving children to a school bus, that is very clearly not business usage and would not be allowed in a substantiation exercise, if the farmer chose to do that. I am not sure whether Senator Messner was asking about farmers or farm employees. If any farm employees are provided with vehicles by the employer-perhaps it happens, although I must say that I have never heard of it-the same rules would prevail. Either the statutory formula will be adopted or, if the taxpayer believes that the statutory formula is unfair to him, he can keep a log book. Senator MESSNER(South Australia)(6.22) —I may not have made the point absolutely clear. I was talking about a situation where the farmer was in an employee situation, where a company or trust actually owned the farm and conducted the business and employed the farmer as an employee of the farming operation. Having clarified that-- Senator Walsh —If they are paid wages, they will be treated as employees. Senator MESSNER —In which case the situation that the Minister outlined would apply and the farmer would be caught for the fringe benefits tax. The other point that I would like to make-it is a general one-is that the fringe benefits tax, it seems, is payable in circumstances where a tax deduction has already been denied for the cost of operating vehicles. I instance the situation which applies perhaps to high income earners who are on a fringe benefit salary package and who may have, say, a $90,000 Mercedes Benz provided by the company which, of course, is the main target of the legislation and of the Government in seeking to raise this money. In circumstances where a vehicle of that kind is owned by a company and provided to an employee-executive, the company will receive a deduction for depreciation of that vehicle only up to the maximum limit of $26,660. In other words, the greater part of the vehicle cost will not be allowed as a tax deduction to the company. So the furphy that companies will somehow get a tax deduction for luxury vehicles and things of that kind falls to the ground. On top of that, in circumstance where that deduction is not allowable to companies for income tax purposes, we find that a fringe benefit tax is to be applied on the value of the vehicle as well. In other words, there is to be a double taxation effect on companies in that situation. We were amazed at the Government's failure to recognise that point. It is on about imposing a double tax in a situation where a vehicle is not allowable as a tax deduction anyway. Senator WALSH(Western Australia-Minister for Finance)(6.25) —We have come to the nitty-gritty of the matter. What the Opposition is about is subsidising, at the expense of general taxpayers, the use of Mercedes Benz and other prestige vehicles by senior executives. That is what the Opposition is on about. It wants to continue a system that subsidises the self-indulgence of senior executives who want to drive around in a Mercedes at the expense of the rest of the taxpayers. This was no oversight by the Government. It was understood perfectly well by the Government and, to the extent that this tax deters those who provide or have provided these self-indulgences to senior executives from continuing to do so, it is a good thing. Executives can drive around in Holdens; they do not have to have Mercedes, Bentleys or Rolls-Royces. I do not see, the Government does not see and, I gather, the Australian Democrats do not see, any reason at all why the rest of the taxpayers should subsidise that self-indulgence. But in this case the matter goes a little beyond that. The Opposition, which purports to be concerned about sound and healthy economic growth, is on about subsidising through the tax system the self-indulgence of senior executives who want to drive around in Rolls-Royces and Mercedes at public expense-vehicles which, what is more, are imported. Senator Messner —I rise on a point of order, Mr Temporary Chairman. The Minister is gravely misrepresenting the point that I made and refusing to answer the question. The point I made, quite clearly, is that the present income tax law does not allow a deduction for a such a vehicle. The TEMPORARY CHAIRMAN(Senator Colston) —Senator Messner, that is not a point of order. Senator Watson —I thought you were a free trader, not a protectionist. Senator WALSH —It is not a question of protection. I do lean towards the free market, and by definition the free market precludes the use of the tax system and tax subsidies to encourage companies to provide luxury motor vehicles for their senior executives. The Fringe Benefits Tax Assessment Bill is aimed with the double purpose of ending that sort of self indulgence at the expense of the rest of the community and raising additional revenue to finance the tax cuts. Since Senator Messner has raised this issue, I say that on most occasions executives can travel in Holdens, Falcons or even small cars, just as well as they can travel in Mercedes and Rolls-Royces. In other words, there is zero contribution to a healthy economy from the use of a Rolls-Royce or a Mercedes where a cheaper vehicle would do. There is the additional problem, of course, that since those vehicles are imported, to the degree that companies are deterred from buying Rolls-Royces and Mercedes, the current account deficit will be closed. The Opposition is in favour, firstly, of continuing through the tax system the subsidisation of status symbols for senior executives which make absolutely no contribution to economic product and, simultaneously, exacerbating the current account deficit and denying the revenue, or a portion of the revenue, that is needed to finance tax cuts for taxpayers in general. Senator MESSNER(South Australia)(6.28) —I rise merely to deny the assertion by the Minister for Finance (Senator Walsh). He has failed to address the very point that I raised. The fact is that tax deductions are not available to companies in the circumstances that he outlined, and he should realise that. We are asking the Government to explain why it is that, in the circumstances where no tax deduction is available-it does not apply only to motor cars; it applies in many other circumstances-it seeks to impose a fringe benefits tax as well; in other words, the double whammy. That explanation is not forthcoming from the Minister. Senator WALTERS(Tasmania)(6.29) —I just want to put a very simple question about a farmer who drives his ute to town to pick up a piece of machinery and at the same time his wife goes along and does the shopping. Is that private use or farm use? Senator WALSH(Western Australia-Minister for Finance)(6.30) —In that specific case it is farm use. I am not sure about commercial vehicles. The definition of a commercial vehicle is probably dependent on its rated carrying capacity. Senator Watson —It is one tonne. Senator WALSH —A vehicle with a capacity of below one tonne is classified as a passenger vehicle and vehicles with a capacity of over one tonne are classified as commercials. Anyway, no matter what the capacity of the utility, in those circumstances it would be business use. That relates to the answer I gave earlier, that either one-third of the vehicle's use will be deemed to be business use or, if the farmer concerned chooses to keep a log book or substantiate-the term used by the Australian Taxation Office-he will get an allowance for business use greater than one-third of the total use if in fact the business use is more than one-third. Amendment agreed to. Question put: That the clause, as amended, be agreed to. The Committee divided. (The Chairman-Senator D. J. Hamer) Ayes . . . . . . . . . . . 35 Noes . . . . . . . . . . . 29 —— Majority . . . . . . . . . 6 —— Aulich, T. McIntosh, G. D. (Teller)Black, J. R. McKiernan, J. P. Bolkus, N. Macklin, M. J. Chipp, D. L. Maguire, G. R. Coates, J. Mason, C. V. J. Colston, M. A. Morris, J. Cook, P. F. S. Ray, RobertCooney, B. Reynolds, M. Crowley, R. A. Richardson, G. F. Elstob, R. C. Ryan, S. M. Evans, Gareth Sanders, N. K. Foreman, D. J. Sibraa, K. W. Gietzelt, A. T. Siddons, J. R. Giles, P. J. Tate, M. C. Grimes, D. J. Vigor, D. B. Haines, J. Walsh, P. A. Jones, G. N. Zakharov, A. O. McClelland Alston, R. K. R. Lewis, A. W. R. Archer, B. R. MacGibbon, D. J. Baume, Michael Messner, A. J. Baume, Peter Newman, J. M. Bjelke-Petersen, F. I. Parer, W. R. Boswell, R. L. D. Puplick, C. J. G. Brownhill, D. G. C. Reid, M. E. (Teller)Carrick, Sir John Sheil, G. Collard, S. J. Teague, B. C. Crichton-Browne, N. A. Townley, M. Durack, P. D. Vanstone, A. E. Guilfoyle, Dame Margaret Walters, M. S. Hamer, D. J. Watson, J. O. W. Hill, R. Withers, R. G. Knowles, S. C. Childs, B. K. Chaney, F. M. Coleman, R. N. Kilgariff, B. F. Button, J. N. Jessop, D. S. Robertson, E. A. Short, J. R. Question so resolved in the affirmative. Sitting suspended from 6.37 to 8 p.m. Clauses 10 to 13-by leave-taken together. Senator MESSNER(South Australia)(8.00) —These clauses relate to the Government's intention to tax fringe benefits on motor vehicles. I make the point again that this is an employment-destroying tax which clearly will lead to the loss of jobs in the South Australian car industry which, of course, obviously will have an indirect impact on industries in other States as well which are providing materials and components for the motor car industry. I instance the effect on New South Wales because the steel industry, based in Port Kembla and Newcastle, manufacturing sheet metal for the motor vehicle industry, anticipates a fall in its production of that product for the car industry of some 20 per cent this year. Quite clearly, the impact of this Government's fringe benefits tax will have very significant direct effects on motor cars not only produced in South Australia but also in other parts of the Commonwealth. All these things can only be described as job destroying. One wonders why the Government continues to persist with this measure especially in the light of the Australian Democrats seeking to move some ameliorating measures in this regard, but nowhere near enough, of course. Clearly, this is the reason why members of the Liberal Party of Australia and the National Party of Australia stand opposed to the measure and why we, when elected to government, will be in a position to repeal this job-destroying tax measure. I think the issues in respect of motor vehicles were aired very strongly in debate prior to the suspension of the sitting for dinner. As such, I will not seek again to put before this chamber the matters that we discussed at that stage. However, I indicate again the absolutely categorical opposition of the Liberal and National parties to this tax. Senator SIDDONS(Victoria)(8.02) —I rise only because we have heard from Senator Messner precisely the same comments that he made on the motor car industry before the suspension of the sitting for dinner. I was hoping that we could have got on with the Fringe Benefits Tax Assessment Bill. Let me reiterate that the amendments that have been moved, which were passed just before the suspension of the sitting, will cost the Government $200m worth of revenue and are very substantial amendments. As such, the impact on the car industry in South Australia, as in other States, will not be severe at all. In fact, with these amendments the four automotive manufacturers have stated publicly that they believe that the fringe benefits tax, in its present form, will have a minimal effect on employment as far as the motor industry is concerned. That is also the position of the motor car unions, the Australian Council of Trade Unions, the South Australian Government and the New South Wales Government. So it would seem to me that the Opposition should at least be prepared to concede that something positive has been done in regard to the tax as it applies to the car industry. Question put: That the clauses stand as printed. The Committee divided. (The Chairman-Senator D. J. Hamer) Ayes . . . . . . . . . . . 31 Noes . . . . . . . . . . . 29 —— Majority . . . . . . . . . 2 —— Aulich, T. McIntosh, G. D. (Teller)Black, J. R. McKiernan, J. P. Button, J. N. Macklin, M. J. Chipp, D. L. Maguire, G. R. Colston, M. A. Morris, J. Cook, P. F. S. Ray, RobertCooney, B. Reynolds, M. Crowley, R. A. Richardson, G. F. Devlin, R. Ryan, S. M. Elstob, R. C. Sanders, N. K. Evans, Gareth Sibraa, K. W. Foreman, D. J. Siddons, J. R. Gietzelt, A. T. Tate, M. C. Giles, P. J. Walsh, P. A. Haines, J. Zakharov, A. O. Jones, G. N. Alston, R. K. R. Lewis, A. W. R. Archer, B. R. MacGibbon, D. J. Baume, Peter Messner, A. J. Bjelke-Petersen, F. I. Newman, J. M. Boswell, R. L. D. Parer, W. R. Brownhill, D. G. C. Puplick, C. J. G. Carrick, Sir John Reid, M. E. Chaney, F. M. Sheil, G. (Teller)Collard, S. J. Teague, B. C. Crichton-Browne, N. A. Townley, M. Durack, P. D. Vanstone, A. E. Guilfoyle, Dame Margaret Walters, M. S. Hamer, D. J. Watson, J. O. W. Hill, R. Withers, R. G. Knowles, S. C. Childs, B. K. Kilgariff, B. F. Coleman, R. N. Jessop, D. S. McClelland, Douglas Short, J. R. Robertson, E. A. Baume, MichaelCoates, J. Durack, P. D. Question so resolved in the affirmative. Clause 14 to 19-by leave-taken together. Senator MESSNER(South Australia)(8.10) —Clauses 14 to 19 relate to the fringe benefits tax being applied to loans; that is to say, if concessional interest rate loans are made by companies, financiers, banks or insurance companies to their employees the employers will be forced under this legislation, if it passes the Parliament, to pay a fringe benefits tax at the rate of 49 per cent on the differential rate of the interest rate paid in respect of that loan compared with the lowest rate available for a housing loan purchase from the Commonwealth Bank. There are a number of points that we would like to bring out in the course of this debate. Firstly, I acknowledge that the Government has included in the Bill a provision whereby the waiver of debts will also be made subject to the fringe benefits tax. That was not announced by the Government in the initial proposals of the Treasurer (Mr Keating) in September last year. We have had no explanation as to why it has been included but, clearly, it is in the same area of benefit as loans and, consequently, we can see the logic of the position. But that does not mean that we accept it. As I indicated earlier, we will be opposing the clauses now under discussion and will divide on the matter. The first matter I bring to the attention of the Minister for Finance is the situation of small businesses. It could also apply to trusts by which small businessmen undertake their business operations. These small businessmen employ about half the working population of Australia. In the situation that quite often does pertain, it is possible that small businessmen operating in that way will make loans to directors of the company or to employees at a low interest or even interest free. This sometimes occurs even though the person to whom the loan is made is not necessarily an active employee of the company. For instance, he or she may be a director of the company and may be in receipt of only very low levels of director's fees. I would like to distinguish between that case and another where a person who is the beneficiary of an interest free loan or a low interest loan is in fact a director of the company but is not in receipt, nor has he ever been in receipt, of any income as a result of being a director of that company. This can arise in many ways. It is quite possible that companies that do operate in the way that I have just described have no income from which to pay any tax in the nature of a fringe benefits tax. Frequently they are just holding companies which own farming properties or other businesses and have been established in that way in order to establish a form of limitation of legal liability in the event of loss of the property which is the subject of ownership either through bankruptcy or through negligence suits and professional indemnity cases. Those situations are quite legitimate and obviously do come into existence as a result of motives which individuals have other than purely tax dodging, which Senator Walsh referred to earlier. In other words, there are legitimate commercial reasons why people establish their businesses in that fashion and we do end up with loans being made to people in the circumstances I have outlined. Given that such companies have no real income or very little and certainly very little cash flow, can the Minister point out to us how the companies will be able to pay the fringe benefits tax, if it is applicable? I would like to hear from him as to whether the circumstances that I have outlined apply to small businessmen operating in companies such as the ones I have described. On the broader issue of bank employees and members of the staff of insurance companies, building societies, merchant banks and other financial institutions being in receipt of loans from their employers at concessional rates, the question arises as to whether this legislation will retrospectively affect their employers. Many of the loans that are in existence for employees in that situation have been in existence for very many years-30 years in many cases. The Government seeks to apply a fringe benefits tax to that concessional rate of interest. I ask the Minister, firstly, whether such retrospectivity as is now included in this legislation applies to loans that are currently in existence. Is my understanding wrong in that case? Furthermore, the Government has recognised in other parts of this Bill that goods and services which are provided to employees by employers are allowed a 25 per cent discount before the fringe benefits tax will apply to those goods and services. This applies to an employee at David Jones who can buy a suit from his employer at a discounted rate because he is a member of the staff of that company. As I read the Bill, the discount of 25 per cent in those circumstances does not apply to loans in this situation. There seems to be a discrimination here as well. Not only is there retrospectivity, but also there is discrimination in that people can get a discount for the purchase of goods and services, but no such discount is applicable for people who are borrowing money to buy the most important possession of their lives-their own house. That seems to be incongruous. I do not understand why the Government does not allow a discount in those circumstances. Clearly, those kinds of anomalies will create more hardship for operators in this area. As we pointed out earlier in the debate, if it is the Government's intention to push people, that is employers, to cash up benefits, clearly the impact of these measures will eventually be upon the lower income employees who are obtaining this kind of fringe benefit from their employer. The effect of these measures will be quite significant over time, but for now I would appreciate the Minister's comments on the questions I have raised. Senator WALSH(Western Australia-Minister for Finance)(8.19) —If I heard Senator Messner correctly, he was postulating that a holding company which had no assets and no income might have granted a housing loan to one of its directors. If that is so, it seems to me like a pretty shonky arrangement. Why is a holding company with no assets and no income granting a housing loan to one of its directors? It sounds almost as shonky as another case that I can remember a few years ago concerning somebody who, according to the records of the Corporate Affairs Commission of New South Wales, was a director of a company called Mundroola and was living in a house, also called Mundroola, owned by the company. He had been living in that house and had been a director, according to what the Corporate Affairs Commission records showed, from 1974 to 1981. Under those circumstances either that director was obliged to include in his personal tax return, as imputed income for a company-occupied house, some notional rent, or alternatively, the company was required to include in its company taxation return the rent received from the director-tenant of the company-owned house. The tenant concerned at the time was the Chief Justice of the High Court of Australia. Very conveniently in 1981 a letter of resignation became public which was dated 1974. The ink was still wet. In other words, the Chief Justice of Australia at that time was in a situation, by any prima facie grounds of evidence, in which he was a tax evader. To get himself around that problem he became a forger. The sort of case that Senator Messner was presenting seems to me to be about as shonky as that particular arrangement. If somebody, in an arrangement as shonky as that, is in some way caught up by this law, it seems to me a further demonstration of why we need a law such as this. The question of a 25 per cent discount on purchases by employees of companies not applying to loans is, according to my information, correct. The discount of up to 25 per cent on purchases is a concession. It is a concession that has been offered for two reasons: Firstly, because the sort of people who are affected by it are `little' people; secondly, given that the absolute amounts involved are likely to be so small it is really not worth pursuing administratively. It is a very different case if one were to offer a 25 per cent discount on a housing loan. Let us take a housing loan of $50,000 at present interest rates. A 25 per cent discount on that is, in round figures, $2,000 a year. A fringe benefit of $2,000 a year is vastly in excess of the sort of small benefit which the employee of David Jones, Grace Bros, Woolworths or of such firms as those gets. So, yes, there is a concession to the `small' people which has not been extended to those who are into fringe benefits in a big way. The final point I want to make is that where such a loan is in existence the tax will apply only prospectively, that is to the extent that there is an interest concession which has a value in the future. Senator Messner —But does it apply to existing loans? Senator WALSH —Yes, but only on prospective interest. So, Senator Messner wants to make a case that is retrospective; I suppose people can believe whatever they want to believe, and Senator Messner can believe what he wants to believe. But on any rational assessment it is just not so; the tax is not retrospective. If it applies at all it applies only to the value of the interest concession which will accrue prospectively. Senator MESSNER(South Australia)(8.24) —The tirade of the Minister for Finance is typical of him and is not something to which I was seeking a reply. I was seeking an answer to a technical point that I am trying to establish. Because of the breadth of the Fringe Benefits Tax Assessment Bill 1986 and the way it defines an employee as being a person who is either a past employee, a current employee, or a future employee, loans could inevitably go on forever. I will give the Senate an instance of the sort of situation that could occur. A young man at the age of 16 or 17 years of age is employed by his father as a greengrocer. He works part time after school. For the purposes of the legislation, it seems to me that he becomes an employee. At a later stage in his life he may marry at, let us say age 24 and his parents, in the normal way that parents do, may decide to give him a loan at a reasonable family arrangement, at concessional rate of interest or even interest free, to purchase a home for his new family. Because of the breadth of the situation and the definition in the Bill it seems to me that that loan would become chargeable and liable to fringe benefits tax. I am trying to establish whether part time employees in that situation are of the kind that will be caught by the Government's legislation. By extension, I was also trying to find out from the Minister whether or not in the circumstances of small proprietary companies where loans are made to directors-maybe the son, in the case I have just mentioned, had been a director of the company at some time during his life, in the past or even perhaps at some time in the future-the directors would then be caught for the fringe benefits tax in any circumstances that might apply right throughout their lifetime? I would also like to know whether such a person would be classed as an employee if that person is a director even though he receives no remuneration. Maybe he never received any remuneration from the company. If he did receive some remuneration, even of a small nature, perhaps a nominal sum for being a director of that company, does he then find himself caught and defined as an employee, be it past, current or future, for the purposes of the application of the fringe benefits tax? Senator WALSH(Western Australia-Minister for Finance)(8.27) —In relation to the question about the director who received no payment as Senator Messner said, one can get payment in various ways. One can get payments above the table as a wage or a salary or a directors fee, or one can get payments below the table in the form of having fees paid to Geelong Grammar School for one's children, or to the Melbourne Club for membership or for a Rolls-Royce or a Mercedes Benz. If a director received income in cash for services as a director or whether he receives in the ways I have mentioned, is not, in principle in my view, at all relevant. The answer to the question is: If the person concerned were a director, and therefore deemed to be an employee of a company, and received no income in cash for those services, but received income in kind, that would be, until such time as it is cashed out, taxable in the hands of the company. And so it ought to be, because this is precisely what this legislation is aimed at; at closing off rorts such as that where people who are company directors can receive very substantial remuneration in kind on which nobody pays any tax. That is what this legislation is aimed at. I will cite again the former High Court judge who was occupying a company house-I have only circumstantial evidence on this, of course, and section 16 of the Income Tax Assessment Act prevents me from obtaining anything more substantial-on which presumably he was paying no rent. Senator Messner —I raise a point of order, Mr Temporary Chairman. On the question of relevance, the point we are on is loans being paid to employees. Senator WALSH —No. I am explaining the rort. The TEMPORARY CHAIRMAN(Senator MacGibbon) —There is a point of order being raised, Minister. Senator Messner —This question is one of relevance. It appears to me that the Minister is being totally irrelevant. We are dealing with loans and there are questions of interest to the people of Australia about the interpretation of this legislation which need to be answered. I hope that the Minister will take a more constructive attitude to the debate. The TEMPORARY CHAIRMAN —There is no point of order. Senator WALSH —I was answering Senator Messner's question. He raised a question about directors not receiving any income in cash but receiving income in kind which clearly includes people who were receiving housing loans at concessional rates of interest. The case to which I referred is highly relevant, because the prima facie evidence shows that the Chief Justice of Australia between 1974 and 1981 was a tax evader. When so much information was thrown out that would have established him as a tax evader to the Commissioner of Taxation, he became a forger to get himself off the hook. Unfortunately he got away with it. Once this Bill becomes law, people will not be able to do that any more because, if somebody in that position is occupying a company house without paying any rent, the company will be charged tax on the rent equivalent. The other question of fact concerned a past employee who continued to receive a fringe benefit. If someone who has been an employee and in that capacity received a concessional loan from the company-he is no longer an employee of the company but continues to receive the benefits of that concessional loan-I am advised that the answer is that the company will be charged the fringe benefits tax accordingly. The company, unless it is tied up in a watertight contract, would have the option, I suppose, of calling in the loan. If Senator Messner is going to suggest, as his comments imply, that there is something unduly harsh about that, I think we need to look at the reason why the company gave the employee the concessional loan in the first place. It seems to me very clear that the reason was that the company was paying that employee income in kind. The whole trust of this Bill is directed against income being paid in kind free of tax. The question of children was also raised. The recurrent theme, which I understand was also raised in the House of Representatives, is the assertion that tax will be imposed on parents who employ their children. It is said that the bedrooms of children on a farm, the meals they eat, the birthday presents they receive and so on will be taxed. This is also said about children employed in small businesses-for example, a plumber who has an apprentice son; perhaps these days a plumber can have an apprentice daughter. The fact is that a benefit is taxable only if received in respect of employment. The examples above are clearly situations where the benefit is given out of the ordinary family relationships and parental responsibilities to their children. It is not related to employment and will not be taxed. Senator WALTERS(Tasmania)(8.33) —I would like the Minister to clarify a point in relation to rural areas. The Minister would know that often a son will follow in his father's footsteps and work on the family property. What will be the position if the son lives within the family home while being employed by his parents? Will his board be calculated as a fringe benefit as he is a full employee of the father in that instance? Will the meal made by his mother and the accommodation supplied by his father as a full employee of the parents be taken to be board of the type that is stipulated in the little lilac book? Senator WALSH(Western Australia-Minister for Finance)(8.34) —In general, the answer is no, it would not be taxable for somebody who is the child of, to take Senator Walters's case, a farmer and who is living in the family home. Apart from the question of parental relationship, responsibility or whatever, there is also in principle, of course, a sound reason for this. In a case where, let us say, a 16- or 17-year-old is working on a farm and still living in the family home on the farm, neither the provisions nor the accommodation which the parent is supplying to the child are tax deductible to the parent-I will lodge one caveat there and add something to it later-because in general personal housing is not tax deductible nor is household expenditure on food and whatever. The situation is, though, of course, quite different when somebody who is an employee at arm's length, if you like, is living in a house provided by the employer on which the employer is able to and has claimed deductions from the employer's taxable income related to the cost of providing and maintaining the house. I now turn to the caveat that I referred to. Of course, I do not hear the National Farmers Federation talking too much about this, for pretty obvious reasons. In a farm situation the personal residence is tied to the farm and, if there is a mortgage on the farm, the interest payments on that mortgage are deductible from taxable income even though in a puristic sense not all of them ought to be if full equality of treatment were to be provided. If the farm has on it a house which is used as a residence by the owner, the owner is in a de facto way, if there is a mortgage, claiming a deduction from taxable income for interest payments on that house. That, of course, is a concession. It can be a major concession. It is one I do not hear very much about; nevertheless, it exists. I guess, given that we live in a world that is less than purist and given the obvious complications of disentangling whether the mortgage is on the house or the farm, even though under normal circumstances the two are sold together, it is not worth pursing. Nevertheless, it is a windfall gain to a number of people who are engaged in agriculture. Senator NEWMAN(Tasmania)(8.36) —I ask the Minister a question subsequent to what he has just been saying. Am I to understand that if a farmer and his wife have two young men living in the farm house, both working on the farm, and one is related by blood and the other is not, there will be a fringe benefit payable on the accommodation of the one who is not related by blood but there will be no fringe benefit payable on the one related by blood? Senator WALSH(Western Australia-Minister for Finance)(8.37) —Senator Newman used the term `blood relation'. I am not sure how far one can extend that, so I will be a bit guarded in my answer. But if it were a direct member of the family-as direct as, say, a sibling or an offspring-as I understand it, the answer is no, that would not be assessable; nor, probably, would it be if it were, say, an adopted child who had no identifiable genetic relationship with the provider. If I am wrong about this, I trust the officials will correct me. I have not had time to consult them. If, on the other hand, the person still living in the house is not an identifiable relation in any way and is being provided with meals and accommodation-and I believe there is still some provision in the farm workers award allowing an employer to deduct from the wages of that employee some allowance for board and lodging-the difference between whatever deduction is made and the cost of providing the board and accommodation would be taxable as a fringe benefits tax, with the proviso that account would be taken of whether an employer could demonstrate that in fact the cost was more than that. However, that is rather complicated and I think that perhaps I had better give the honourable senator an answer in writing. I think the answer in general is that, if employees are not necessarily blood relations but members of the family in the sort of way I have defined it, there would be no tax applied; but if they were clearly not identifiable with the family in any way, it would be. Senator PARER(Queensland)(8.39) —I would just like to ask the Minister whether there is a provision in this Bill for that distinction. Senator WALSH(Western Australia-Minister for Finance)(8.39) —I am advised that only part of what I said was correct. Senator BROWNHILL(New South Wales)(8.40) —There is no provision in clause 14 for an employer to waive a debt because of financial hardship of the employee. I give an example of this which will get the Minister for Finance (Mr Walsh) out of the Mercedes and Rolls-Royces and back into the relationship between an employer and employees on a farm, as the Minister would have remembered back in his time, when the employer may have given a loan to an employee on a reasonable rate of income, at the ordinary rate of interest, not the concessional rate. If, because of the employee's hardship, he cannot repay the loan and the employer waives the repayment of the loan, there does not seem to be anything in clause 14 to clarify that. I think it would be rather hard on some of the bona fide employees who have received an ordinary loan, not a concessional loan. The wording in clause 16 is bad because, if one reads it and is unaware of what is stated in other parts of the Bill in terms of the provider, one could incorrectly, but most probably understandably, make the assumption that anyone who makes a loan to another person would be liable for fringe benefits tax. Senator WALSH(Western Australia-Minister for Finance)(8.41) —The last point, as I understand it, is quite wrong because there has to be an employer-employee relationship before a loan would become taxable. It is certainly incorrect to say that anyone who makes a loan on concessional terms to anyone else is liable to pay such a tax, because there must be an employer-employee relationship for it to apply. On the question of clause 14, it is conceivable that the circumstances Senator Brownhill set out could happen, but it is also necessary to have a clause such as that to close off a potential loophole whereby an employer could grant, in lieu of wages or salary income, a highly concessional loan. If an employer comes to an arrangement with an employee to pay the employee $10,000 in salary and to give him a $20,000 loan, then 12 months later the employee says that he is in a bit of a financial jam and cannot repay the loan, the employer could write it off. If we allow that sort of thing to happen, it would clearly open up a loophole which could undermine the whole purpose of closing off the concessional loans. Senator Brownhill —What about the bona fide loan, where it goes on for 10 years? Senator WALSH —The only problem there is that it is a bit hard to define what is bona fide. Senator MESSNER(South Australia)(8.43) —I return to this point because it is critical that the Minister for Finance (Senator Walsh) understands exactly what the Opposition is trying to put to him so that we can get some clear statement on how the new tax will apply. I refer again to the example I gave earlier, which has been mentioned by my colleagues as well. Where a 16-year-old son of a greengrocer works part time in the shop and receives a part time salary, as I understand it, within the meaning of `employment' in the Bill he is an employee. At some future time, given that he finished that employment, got some other job with some other employer at the age of 23 or 24, then subsequently decided to marry, if a loan is made by his father, as I read this Bill, he is defined as an employee because he is a past employee of his father. Even if we look at it the other way around-that he may be a future employee-he would be caught because the definition includes future employees as well. We are trying to get this point clear. Is a person in that situation defined as an employee of his employer and is fringe benefits tax applicable? Senator WALSH(Western Australia-Minister for Finance)(8.45) —I am advised that the answer to that is no because the benefit, although hypothetical, was not given in respect of that employment. Senator WALTERS(Tasmania)(8.45) —In relation to the question I asked, which was picked up later by Senator Newman, the Minister for Finance (Senator Walsh) said that he was partly right. Can the Minister tell me the difference, because I cannot find anywhere in the Bill anything which says that an employee who is a member of the family will not be charged fringe benefits tax on board, whereas another employee who is not a member of the family will incur fringe benefits tax on the board. Can the Minister explain where that is laid out clearly in the Bill? I have had a chat to a member of the House of Representatives who said that a different description entirely was given in the other place and I would like to know who is right, the Minister or the Treasurer (Mr Keating). Senator WALSH(Western Australia-Minister for Finance)(8.46) —The benefit-- Senator Crichton-Browne —Does it make any difference if it is the subject of an award? Senator WALSH —It is not a question of a reward, it is a question of whether the benefit was provided because of the employer-employee relationship. The general ruling would be, particularly in the case of a minor who was employed and was living in the parental home, that the benefit was not given because of the employer-employee relationship but because of the family relationship. Senator Newman asked whether the person had to be a blood relative. The answer to that would have to be no because an adopted child is not a blood relative. Senator Crichton-Browne —I don't think she was being that subtle. Senator WALSH —She used the term `blood relative'. The critical determining factor is whether the benefit was provided because of an employer-employee relationship of a family relationship. I guess it is a matter of common sense. It may not always be easy to distinguish between the two, as it is not easy in many matters of taxation law, but if Senator Walters wants something definite from the Commissioner of Taxation, I will get it in writing. Senator WALTERS(Tasmania)(8.48) —It is very simple. A 20-year-old lad is the son of a farmer and is a full time employee of that farmer. If he were not employed by his father he would be working elsewhere and would not be living on the property. He is living in his family home because he is not married and he is a full time employee. Let us make him 23 years old, so we will not call him a minor. His mother cooks his meals and his father supplies the bedroom. Will that lad's board be calculated in the fringe benefits tax? It could not be clearer. Senator WALSH(Western Australia-Minister for Finance)(8.49) —There is one omission from Senator Walters's hypothetical case. The same young man could be living at home and employed in a nearby town, in which case the board would not be counted. If he were employed on the farm and had been living in the same house he had lived in since childhood, the answer is that the board would not be counted. While I am on this question, just in case anybody in outback Queensland has been listening to the usual heap of nonsense, rubbish and misrepresentations that have been pouring out from members of the Country Party, or the National Party as it calls itself these days, who I understand have been peddling this myth in a very big way in Queensland in particular but also in New South Wales, the answer is that what they are saying is not true. Senator WALTERS(Tasmania)(8.50) —Can the Minister tell me where in the Bill we find that the answer is no because the Bill states that if he is an employee the fringe benefits tax does apply. It does not state that if the employee happens to be the son or daughter of the employer he or she is not charged board even if he or she has lived in the home since birth. Can the Minister explain to me where the Bill makes allowance for a son or daughter not to be charged board when they are full time employees, but someone who is not related must be charged board? Senator WALSH(Western Australia-Minister for Finance)(8.51) —The answer appears in the definitions. Since Senator Walters purports to be such an expert on these matters, it is a pity she has not looked at the Bill properly. Incidentally, I do not pretend to have done that. I have been occupied by one or two other things. But if she looks at page 105, dealing with definitions, at line 12 she will find the words `fringe benefit' and at line 25 `in respect of the employment of the employee'. I will not quote the entire definition, but it sets out what I have been saying; that is, that it depends on whether the benefit is received because of the employee-employer relationship or for some other reason. Senator WALTERS(Tasmania)(8.52) —That does not clarify it at all. Quite frankly, in the situation I have suggested to the Minister, the child of the employer is a full time employee. If he were not a full time employee, he would not be residing in the family home. He would, by necessity-- Senator Walsh —Not by necessity at all. Senator WALTERS —Not by necessity, but it is because on this occasion he is a full time employee of the farm that he is residing in the family home. I have read the definition to which the Minister referred very quickly and it has nothing to do with relationships. It has to do only with the employee receiving board because he is an employee. Obviously, in the instance I gave, he is receiving the board as an employee. If he were not, his father would have to employ someone else. That person would obviously board there, too. Senator WALSH(Western Australia-Minister for Finance)(8.53) —I do not know how long we have to go on with this, but the critical line is `in respect of the employment of the employee'. I do not know how many times one has to say these things. The Bill states: `fringe benefit', in relation to an employee, in relation to the employer of the employee, . . . means a benefit- . . . . in respect of the employment of the employee . . . What Senator Walters is saying is that it is a benefit in respect of his being a member of the family and not an employee. If she is too thick to understand it, it is my misfortune, but it is not my fault. Senator NEWMAN(Tasmania)(8.54) —In view of the fact that the Minister seems to have difficulty in finding his way around the Bill, I draw his attention in considering this matter to page 101 where the definitions of `employee' and `employment' are clearly set out. It may help the Minister in deciding whether that blood relation or son of the employer is an employee if I read the definition to him. It states: `employee' means- (a) a current employee; (b) a future employee; or (c) a former employee; There is no limitation on that. It does not say `except where he happens to be a member of the family or is boarding there in another capacity'. The definition of `employment' reads: . . . in relation to a person, includes the holding of any office or appointment, the performance of any functions or duties, the engaging in of any work, or the doing of any acts or things that results, will result or has resulted in the person being treated as an employee; I imagine that means that the father, acting as employer, will say: `I want you down at the cattle yards at 7 o'clock and I want you to take the stock into the sale yards'. I imagine that that is his being treated as an employee. Is the provision of his accommodation also in the realms of his capacity as an employee? I would like the Minister, having had the benefit of that walk through the definitions, to give us a more detailed answer. Senator WALSH(Western Australia-Minister for Finance)(8.55) —For the benefit to be relevant it must be paid to an employee and because of the relationship as an employee and not something else. If Senator Newman is going to object to this Bill being passed, I would like to ask her how the hell she thinks the taxpayers of Australia will pay her doubly superannuated husband if we cannot collect some revenue from somebody? Senator Newman —Mr Temporary Chairman, I take a point of order. I feel that the Minister should also make that statement to all the women in the Public Service who are eligible for their husband's superannuation benefits. They will be glad to know he is against that. The TEMPORARY CHAIRMAN(Senator MacGibbon) —There is no point of order. Senator MESSNER(South Australia)(8.56) —The comments of the Minister are absolutely outrageous. I hope he will withdraw that. It is quite clear that the Minister is loosing his cool because quite clearly he cannot answer the questions that are being put to him by the Opposition. I must say that the question last put to him by Senator Newman was a very clear and a precise point that we are trying to get at and which homes in on the difficulty of this legislation. I reiterate-I do not think I can do it as well as Senator Newman-that the point simply is that at page 101, in regard to the definition of `employee', he or she is defined as a current employee, a future employee or a former employee. When we turn to the definition which the Minister spoke of earlier, it refers to employment of an employee. The employee is a current, former or a future employee. If the legislation contains such a definition, which is so all embracing, how can the Minister say that a person will not be liable for the fringe benefits tax in the situation that we have been trying to outline? Senator WALSH(Western Australia-Minister for Finance)(8.57) —I will try to put it in monosyllables, but since it is not written in monosyllables, I cannot do so. Page 105, line 25, reads: in respect of the employment of the employee . . . Senator BOSWELL(Queensland)(8.58) —I would like to pose a hypothetical question to the Minister. I take the case of two sons who have been working on a smallish property that will sustain a one family income. The father gives a son-one son-a loan to buy another property. The son has been employed by the father. He marries and the property will not sustain an income for two people. Is that loan now subject to the fringe benefits tax? Senator Siddons —Mr Temporary Chairman, on a point of order: I am beginning to wonder whether hypothetical questions will be thrown at the Minister all night. There would seem to be no end to this. I ask you, Mr Temporary Chairman, whether it would not be more appropriate for this very esoteric or hypothetical question to be put in writing so that an expert opinion can be gained. The TEMPORARY CHAIRMAN —There is no point of order. Senator WALSH(Western Australia-Minister for Finance)(8.59) —Senator Boswell has not said whether the loan was at a concessional rate of interest. If it was not at a concessional rate of interest-- Senator Boswell —No, it is at a concessional rate. Senator WALSH —The answer is clearly no. If it were at a concessional rate of interest, it depends on whether the loan is deemed to have been granted because of the previous employer-employee relationship. Senator REID(Australian Capital Territory)(8.59) —I raise a matter that occurs in clause 19 and in about 20 other places in the Bill in regard to the requirement for giving information which shall be in a form approved by the Commissioner of Taxation. In clause 19 (c) and (d) and in a number of other places the Bill requires information to be kept in a form approved by the Commissioner. I rely on the report from the Scrutiny of Bills Committee dealing with the 20-odd occasions where this occurs. The Committee regards it as a trespass on the rights and liberties of people that the information may only be kept in a form approved by the Commissioner. Senator Walsh —What line? Senator REID —It is in line 27 of clause 19 (c). That wording appears throughout the Bill as I have indicated. In order for an employer to be entitled to a reduction in the taxable value of a fringe benefit or an exemption from liability in respect of such a benefit, he does not have the opportunity to prove these matters by other evidence admissible in a court of law, by other evidence which would be regarded as suitable in any other jurisdiction. The Scrutiny of Bills Committee goes on to say: Furthermore, if the particular evidence is lost or destroyed within the six-year statutory period in which it is required to be retained, clause 123 provides that the employer is to be deprived of the benefit of that evidence unless he or she has an adequate substitute document. In the likelihood of a form approved by the Commissioner being lost then other evidence might be needed, or there might be some of a quite different nature, and I think that these conditions of requiring the evidence to be in that form are rather stringent. Everyone is presumed to know the law and presumably everyone is presumed to know that these forms will be approved by the Commissioner. Will these be widely distributed? How are people to know what the required form will be? A person who does his or her own income tax may keep perfectly adequate and lucid records of these matters which he or she wishes to claim, yet if these are not in the form approved by the Commissioner, they may be rejected. If the Scrutiny of Bills Committee has interpreted the legislation correctly, it may well be that this person has no recourse whatever and he or she would lose the right to claim a reduction of the taxable value of the fringe benefit or an exemption in respect of that benefit, whichever is appropriate. It seems totally inadequate to have a Bill which in 22 places requires information to be kept in a form approved by the Commissioner. He will be flat out approving forms in the first place and certainly in distributing them and requiring that information to be maintained. Senator WALSH(Western Australia-Minister for Finance)(9.03) —On the question of clause 19, I am advised that it is common in the Income Tax Assessment Act in general that where information is supplied in a form that is not acceptable to the Commissioner, an extension of time is granted to enable the taxpayer to provide that information in an acceptable form. The second part of the question dealt with cases where documents had been lost. That is covered by clause 123 (6) on page 85, which says: Where- . . . . (c) the Commissioner is satisfied that- (i) the person took all reasonable precautions to prevent loss or destruction of the document; . . . . that provision of this Act has effect as if the original document had been given by the person to the employer . . . Essentially that means as long as the taxpayer has acted in good faith. Senator REID(Australian Capital Territory)(9.04) —I realise that the provisions are set out in the Income Tax Assessment Act but this is not an amendment to that Act. It is an original Act on its own and it uses the phrase `in a form approved by the Commissioner'. Senator Walsh —The clause I quoted was from this Bill. Senator REID —I know it was. I have a copy and I have read it myself. However, in view of the number of times this phrase appears, it is essential in this debate for it to be very firmly and clearly on the record that those sorts of provisions which operate as a matter of practice under the Income Tax Assessment Act will, in fact, apply to this legislation and that these provisions will not be construed more stringently than those in the other Act have been. A lot of these provisions could already have been operated under the Income Tax Assessment Act had the Commissioner or the Government wished to operate them. The Minister for Finance says that it is necessary to bring in this legislation to enable a lot of these benefits to be attacked. It is a brand new piece of legislation and we need to spell out quite clearly the way in which it will be administered. It is necessary for the Minister to state clearly and unequivocally in this debate so that it is on the public record that that will be the case. Some of us would say that we do not need the legislation at all in order to do some of the things that the Minister now thinks he needs this legislation to do. Senator WALSH(Western Australia-Minister for Finance)(9.06) —I can say that. I am surprised that Senator Reid is getting into this sort of nit picking. It is not her custom. Some of the more also-ran types on the Opposition back bench have made an art form of nit picking. I do not know why anybody should believe that this Bill will be administered in any less reasonable manner than the Income Tax Assessment Act 1936, the proclamation of which, I understand, happened exactly 50 years ago today. Since this Bill will be administered by the same people, I cannot see why anyone should think that it will be administered any less reasonably. I cannot imagine why anyone would suspect that. The Bill will be administered in the same way and those sorts of clauses will be administered in the same way as the provisions of the Income Tax Assessment act have long been administered. Senator REID(Australian Capital Territory)(9.07) —Nit picking it may be, but the Scrutiny of Bills Committee took it seriously enough to set out in some detail what its members thought about this matter under the heading `Trespass on rights and liberties'. I think it is a matter that needs to be aired and cleared up. Senator MESSNER(South Australia)(9.08) —I wish to return to the debate that we had earlier about the definitions of `employment', `employer' and `in respect of'. I am sure that the Minister for Finance recalls that we have settled the point that `employee' means a past, current or future employee. That definition in itself is very broad. The definition of `in respect of' speaks of the employment of an employee which, as we have already stated, is defined very broadly and appears to have no time constraints whatsoever. The Opposition's problem arises when we relate that to clause 148 of the Bill where the following situation applies-and I quote: (1) A reference in this Act to the provision of a benefit to a person in respect of the employment of an employee-- and there we get those three different words brought together in this clause-- is a reference to the provision of such a benefit-- then there are six or more circumstances which are described as follows-and they are all similar: (a) whether or not the benefit is also provided in respect of, by reason of, by virtue of, or for or in relation directly or indirectly to, any other matter or thing; Any other matter or thing! Surely that covers the situation we are discussing where people are caught in a normal life cycle in circumstances which, because of the definition of `employee', bring them back into the situation whereby the tax would be applied simply because they are employed. The Bill also talks about: (b) whether the employment will occur, is occurring or has occurred; (c) whether or not the benefit is surplus to the needs or wants of the recipient . . . All this apparently is aimed at catching people in innocent circumstances. It is all a question of how one interprets the word `employee'. For the best of reasons we are trying to get to the bottom of what the Government thinks it is doing. It seems to us that quite clearly the Government is attempting to catch people in as wide a net as possible in such a way that those employees, future or past, are caught no matter what they may or may not do in the future. Could we please have a definitive answer on this matter? Senator WALSH(Western Australia-Minister for Finance)(9.10) —What happens in the future is contingent upon there being some continuing benefit. That is one red herring which we can dispose of very quickly. There has to be a continuing benefit, obviously. I really do not know what this is about. The words `in respect of the employment of the employee' appear on page 105 and exactly the same words appear on page 130. I cannot see anything sinister about that at all. The words `whether or not the benefit is also provided in respect of' and `whether or not the benefit is also provided to another person' also appear on page 130. One could, if one wanted, make a reasonable case that the wording is a bit tedious and repetitious. I am not sure why it is thought necessary to make a very similar point more than once, but I expect that it has something to do with the way in which the Income Tax Assessment Act has been interpreted in the past by the High Court of Australia and in particular by the Chief Justice whom I mentioned earlier was on prima facie grounds a tax evader himself and who took a very lenient view towards tax evasion in general, with a literalist interpretation of the law. That may be the reason; I do not really know. But I cannot see any inconsistency. Senator MESSNER(South Australia)(9.11) —I make the point that I think that was a most unsatisfactory answer. We certainly do not accept it and will be opposing these clauses. Question put: That the clauses stand as printed. The Committee divided. The Chairman-Senator D. J. Hamer) Ayes . . . . . . . . . . . 36 Noes . . . . . . . . . . . 29 —— Majority . . . . . . . . . 7 —— Aulich, T. McIntosh, G. D. (Teller)Black, J. R. McKiernan, J. P. Bolkus, N. Macklin, M. J. Button, J. N. Maguire, G. R. Chipp, D. L. Mason, C. V. J. Colston, M. A. Morris, J. Cook, P. F. S. Ray, RobertCooney, B. Reynolds, M. Crowley, R. A. Richardson, G. F. Devlin, R. Robertson, E. A. Elstob, R. C. Ryan, S. M. Evans, Gareth Sanders, N. K. Foreman, D. J. Sibraa, K. W. Gietzelt, A. T. Siddons, J. R. Giles, P. J. Tate, M. C. Haines, J. Vigor, D. B. Jones, G. N. Walsh, P. A. McClelland, Douglas Zakharov, A. O. Alston, R. K. R. Lewis, A. W. R. Archer, B. R. MacGibbon, D. J. Baume, Michael Messner, A. J. Baume, Peter Newman, J. M. Bjelke-Petersen, F. I. Parer, W. R. Boswell, R. L. D. Puplick, C. J. G. Brownhill, D. G. C. Reid, M. E. (Teller)Carrick, Sir John Sheil, G. Chaney, F. M. Teague, B. C. Collard, S. J. Townley, M. Durack, P. D. Vanstone, A. E. Guilfoyle, Dame Margaret Walters, M. S. Hamer, D. J. Watson, J. O. W. Hill, R. Withers, R. G. Knowles, S. C. Childs, B. K. Kilgariff, B. F. Coleman, R. N. Jessop, D. S. Coates, J. Short, J. R. Grimes, D. J. Crichton-Browne, N. A. Question so resolved in the affirmative. Clauses 20 to 24-by leave-taken together. Senator MESSNER(South Australia)(9.18) —Clauses 20 to 24 of the Fringe Benefits Tax Assessment Bill relate to the imposition of a fringe benefits tax where expenses are paid by the employer. I want to draw several points to the attention of the Committee. First, is it a fact that fringe benefits tax will be payable in respect of a reimbursement of expenditure where that expenditure, incurred by the employer, is not tax deductible? I instance the circumstances of entertainment expenses which, by virtue of the present law, even though those expenses may be legitimately incurred in furthering the interests of the business, are not tax deductible. The allowance which is payable to the employee will itself be subject to a fringe benefits tax; in other words, there will be a double whammy effect of non-deductibility on the part of the employer and a tax imposed on the receipt of that money in the hands of the employee. The second point to which I refer relates to the circumstances of people who are engaged as consultants to governments or other operators of business or whatever overseas. As I understand it, this is a growing industry in Australia. Technical experts, perhaps in the engineering or legal field, sell their services as consultants to foreign governments. Many of them live overseas for quite extended periods. On those occasions they take their families with them to live in countries where, for instance, English may not be taught in most schools. Where those families are required to send their children to school in foreign countries but find that they have to seek out expensive educational facilities where subjects are taught in the English language, the consulting company arranges with the family before it leaves to reimburse those very high education expenses. That is one circumstance. The other circumstance is the provision of housing in foreign countries for such consultants. We all know that housing in some parts of the world, particularly in countries in Africa, is very expensive and is subject to very high rates of inflation. The cost of providing that housing is generally beyond the means of the families who move from an Australian setting to a foreign country. Consequently, the consulting employer may well provide the benefit or some cash to make up the difference in costs associated with those people obtaining housing. There are many instances of other situations that may occur where employers in the consulting industry provide benefits for their employees living in foreign countries. For instance, there may be a need to provide furniture in those foreign places at a great cost. There are the normal expenses associated with daily living. The cost of living may be far greater than that experienced in Australia. Consequently, the employer makes up the difference by way of a cash grant, a subsidy, or in some other way. The point I make is simple. This is a developing industry. It is as good an industry for Australia as any other export of services or goods and it produces foreign exchange for Australians. I am advised that this consulting industry is growing rapidly and at this very time generates some $160m-worth of foreign exchange for Australians. Surely, if this is one way of building up our foreign exchange reserves in such dangerous economic times, it is something that we should be encouraging and not discouraging. Am I right in assuming that where expenses are incurred by employers in the circumstances that I have just outlined, which are direct subsidies to employees in foreign countries, those employers will be subject to the fringe benefits tax? Senator MICHAEL BAUME(New South Wales)(9.22) —This may be an appropriate time to raise a matter of concern to me which relates to several clauses, but in particular to clause 21 (d) in this group of clauses that we are now discussing. It relates to substantiation requirements. It also relates to clause 10 (3) (b) and paragraph (c), clause 19 (1) (c) and paragraph (d), clause 21 (d), in this case, clause 24 (1) (c) and paragraphs (d), (e) and (f), clause 34 (1) (c) and paragraph (d), clause 44 (1) (c) and paragraphs (d) and (e), clause 47 (5) (d), clause 52 (1) (c) and paragraphs (d) and (e), clause 61 (1) (b) and clause 63 (d). The reason I have recited those paragraphs is so that we can deal with them all in one go. My point relates specifically to clause 21 (d), which is at present before the Committee, as I understand it, but it is a general point relating specifically to those clauses. Rather than repeat the objection on each occasion, it seems to me relevant to raise the matter now. It also relates to the definitions of `exempt accommodation component' and `exempt food component' in clause 136 (1). This clause-- Senator Reid —I have raised the objections. Senator MICHAEL BAUME —The honour- able senator has raised the objections of the Standing Committee for the Scrutiny of Bills. As I understand it, the objections in the eighth report of the Standing Committee for the Scrutiny of Bills have been raised in respect of another clause. As a member of that Committee, I simply wish to reinforce the concerns relating to trespass on rights and liberties that have been raised in another context by Senator Reid and to remind the Committee that the Scrutiny of Bills Committee drew that aspect of the Bill to the attention of the Senate, under principle 101. The Committee stated: . . . that by so confining the entitlements of employers to make use of evidence which would otherwise be admissible, it may be considered to trespass unduly on personal rights and liberties. Apart from the overwhelming objections in principle to so much of this legislation, I think these specific clauses do trespass in this way against rights and liberties, which at least those of us on this side of the House regard as paramount. Senator WALSH(Western Australia-Minister for Finance)(9.26) —In respect of that last comment by Senator Michael Baume, I have never noticed that the Opposition regards rights and liberties as paramount. The point raised by Senator Michael Baume, as he acknowledged, was covered before. I refer to the earlier questions. I am advised that, if entertainment provided abroad by the employee of an Australian firm is in itself non-deductible, it is, of course, logically not subject to fringe benefits tax, and it will not be. Education fees paid by the employer would be subject to the tax. Housing provided by the employer to an employee abroad would not be subject to the tax if the employee was maintaining a house at home in Australia. Senator Messner —Overseas? Senator WALSH —I understand that housing provided to an employee overseas would come under the living away from home allowance rules. As I understand Senator Messner's question, the important point is that, if the employee is also maintaining a house at home, the employer who provided the house abroad would not be subject to fringe benefits tax. Senator MESSNER(South Australia)(9.27) —I thank the Minister for Finance (Senator Walsh) for his answer. As I understand it, everything turns on the maintenance of a house within Australia by the employee who is living overseas and, provided that that circumstance pertains and he maintains that house, the company will pay no fringe benefits tax. Is that correct? Senator WALSH(Western Australia-Minister for Finance)(9.27) —It is correct, with the added qualification that an employee does not necessarily have to own a house in Australia but must be able to establish a domicile in Australia. It would have to be established that the employee had been a permanent resident in Australia who had a household in Australia. Senator MESSNER(South Australia)(9.28) —We are getting some confusion here. Are we talking about residence or are we talking about domicile? Let us put a case. If an employee is moved for two years to Saudi Arabia and decides to sell up his present house in Australia and move to an employer-provided house in Saudi Arabia, that being a very expensive house, would it be subject to the fringe benefits tax? Let us take a further case. If the employee maintained a house in Australia, would he not be subject to the fringe benefits tax? Let us take a third situation where the employee again owns no property in Australia when he actually undertakes the move but maintains his Australian citizenship and rights of residency. Can we get a principle that distinguishes those cases? Senator WALSH(Western Australia-Minister for Finance)(9.30) —I am not sure whether this covers it all, but when I said `owns a house in Australia' that was too restrictive. If people own a house in Australia that is it; they are exempt. But it is also extended, so I am told, and I would only expect this to happen where an employee normally resident in Australia was absent from Australia for a short period and the employee continued to pay rent on a house in Australia or, in a term that covers both, I suppose, `maintained a residence in Australia'. Senator MESSNER(South Australia)(9.31) —So it is not a question of domicile then? It is a question of maintaining a residence of some kind in Australia? That is the point on which the question turns. Senator WALSH(Western Australia-Minister for Finance)(9.31) —The line `maintaining a residence' is the critical line. The rationale behind that is the presumption that in maintaining a residence in Australia the intention is to return to Australia. Senator MESSNER(South Australia)(9.32) —The Minister, in answer to the first question that I posed in connection with entertainment expenses, said-I think I got him right-that because the entertainment expenses are legitimate, as they might be incurred, are not deductible by the company then the provision of that reimbursement is not subject to a fringe benefit tax in the hands of the employer. I ask the Minister to compare that situation with the situation of a motor vehicle which has a value in excess of the maximum amount of $26,660 allowed for depreciation purposes for a motor vehicle. In that case, no tax deduction is allowable for the depreciation on that vehicle which has a value greater than $26,660. That being so, it appears to me to be analogous to the position of the person whose entertainment expenses are not allowed yet we find that, in the case of the motor vehicle, the employer will find himself subject to a fringe benefit tax on the calculated value of the so-called benefit to the employee who has use of that motor car and, consequently, pays it at the full rate. I draw the Minister's attention to the fact that it appears to me to be an inconsistency in the Bill and, consequently, it is another reason for the Opposition to oppose it. Senator WALSH(Western Australia-Minister for Finance)(9.33) —We are getting repetitious. We have been over this before. The presumption for a motor vehicle in excess of $26,000 or $26,600, or whatever the figure is, is that a motor vehicle more expensive than that has a value to the employee. If it does not have any value to the employee over and above that, why is it provided? If that is the case, I would expect it not to be provided in the future which would be a good thing, for the reasons I have stated before. That is the presumption behind it. I must say that I find it somewhat extraordinary because I think Senator Messner was a Minister in the previous Government at the time that this provision was introduced, that a firm may not claim a deduction from the firm's taxable income for a motor vehicle in excess of that value. So I am astounded why Senator Messner finds something wrong with that now when he apparently found it all right a few years ago. Senator MESSNER(South Australia)(9.34) —I am not finding anything wrong with that proposition at all. What I am saying is that no deduction is allowable for that excess depreciation in respect of that vehicle, yet the Minister is defining that vehicle as being taxable for fringe benefit purposes. So a double tax penalty is being imposed on the employer. Not only is there no tax deduction available but there is the fringe benefit tax which is attributed to it. That is the simple point that we are seeking to make. It applies whether we are talking about motor cars or whether we are talking about entertainment expenses or any other expense which is reimbursed by an employer to an employee in the circumstances that we have just been generally talking about and where those expenses are not deductible, for income tax purposes, by the employer. In those circumstances I fail to see the logic of the Government's position where it seeks to impose the tax effectively twice. I am simply seeking an explanation of that. However, it looks as though we will not get it so we will continue to maintain our opposition to these clauses. Senator NEWMAN(Tasmania)(9.35) —I wish to ask the Minister a question concerning the taxable value of expenses paid by an employee or reimbursed by an employer. Will the Minister confirm that this includes matters such as heating fuels, telephones and those kinds of expenses that may have to be met by an employer in the home of an employee but related to their occupation-the need being, for instance, for district nurses to have a telephone paid for in their home to be able to be called out quickly and also for national park rangers. If these things are included and their expenses paid by the State Governments will the Federal Government be reimbursing the States for these claims of expenses? Also, of course, voluntary organisations, such as the National Trust which has been mentioned a number of times and non-government schools, all have needs for accommodation for their employees and often contribute to the cost of heating, telephones, and cooling in the hot parts of Australia. Will these be treated as fringe benefits and what will the impact of this tax be on those organisations? Senator WALSH(Western Australia-Minister for Finance)(9.36) —I am not sure what clause this relates to, but the answer to the question is that a portion of that will be a fringe benefit, depending on the amount which is attributed to private use and that which is attributed to business use. Senator NEWMAN(Tasmania)(9.36) —Could the Minister explain that in more detail and give us an indication of how these things will be calculated? Senator WALSH(Western Australia-Minister for Finance)(9.37) —I am advised that similar rules apply now; that is, where an employee pays the bill on an existing phone and claims some portion of that to be attributable to business use and some of it to private use, the same sorts of rules will be applied. In other words, I suppose it will be determined on a case by case basis depending on whether the attribution to private and business use is deemed to be reasonable. Senator NEWMAN(Tasmania)(9.38) —I realise that the Minister feels that a lot of these questions are nitpicking, but I draw his attention to the fact that it is the very uncertainty of this sort of thing which is leading to so much confusion and concern in the community. It is not so much that people are antagonistic to paying tax, perhaps on benefits that could be regarded as part of an income package, but it is the method by which it is being done and the uncertainty of it. The Minister has confirmed several times tonight that the Government is obviously also uncertain and I urge the Government to provide this information to people as soon as possible because it is causing tremendous worries, especially for organisations which are making no money at all. Some of them look as if they might have to shut down because of these expenses which they fear, at least, will be so great for them. Question put: That the clauses stand as printed. The Committee divided. (The Chairman-Senator D. J. Hamer) Ayes . . . . . . . . . . . 35 Noes . . . . . . . . . . . 28 —— Majority . . . . . . . . . 7 —— Aulich, T. McKiernan, J. P. Black, J. R. Macklin, M. J. Bolkus, N. Maguire, G. R. Chipp, D. L. Mason C. V. J. Colston, M. A. Morris, J. Cook, P. F. S. Ray, RobertCooney, B. Reynolds, M. Crowley, R. A. Richardson, G. F. Devlin, R. Robertson, E. A. Elstob, R. C. Ryan, S. M. Evans, Gareth Sanders, N. K. Foreman, D. J. Sibraa, K. W. Gietzelt, A. T. Siddons, J. R. Giles, P. J. Tate, M. C. Haines, J. Vigor, D. B. Jones, G. N. Walsh, P. A. McClelland, Douglas Zakharov, A. O. McIntosh G. D. (Teller) Alston, R. K. R. Lewis, A. W. R. Archer, B. R. MacGibbon, D. J. Baume, Michael Messner, A. J. Baume, Peter Newman, J. M. Bjelke-Petersen, F. I. Parer, W. R. Boswell, R. L. D. Puplick, C. J. G. Brownhill, D. G. C. Reid, M. E. (Teller)Carrick, Sir John Sheil, G. Collard, S. J. Teague, B. C. Durack, P. D. Townley, M. Guilfoyle, Dame Margaret Vanstone, A. E. Hamer, D. J. Walters, M. S. Hill, R. Watson, J. O. W. Knowles, S. C. Withers, R. G. Childs, B. K. Kilgariff, B. F. Coleman, R. N. Jessop, D. S. Coates, J. Short, J. R. Grimes, D. J. Crichton-Browne, N. A. Button, J. N. Chaney, F. M. Question so resolved in the affirmative. Clauses 25 to 29-by leave-taken together. Senator MESSNER(South Australia)(9.45) —These clauses of the Bill refer to the provision of housing fringe benefits to employees. This covers a situation where companies operating in remote locations-for instance, on mining properties in the far outback of Australia-are providing housing for employees who have to be taken to those spots in order to undertake work in the mining industry. Some companies do not necessarily provide housing in those circumstances. Many use commuter transport, to use a much used phrase, and bring people on a cyclical basis from, say, a large city such as Adelaide to the spot where the mining is undertaken, maybe 300, 400 or 500 miles away. That is one way of curing the problem. I am sure people from the Opposition will be seeking to expose this point further. It seems to me to be the wrong way to be heading to seek to encourage mining companies and operators in the far outback to undertake the kind of commuter operation which I have just described rather than trying to establish towns in areas where mining is being undertaken in order to develop a community and to provide facilities where families can live as near normal a way of life as possible. Surely that is a quite a reasonable proposition which is of benefit not only to the employee but also to the nation as a whole as it builds more stable family situations rather than building a gypsy kind of life with people moving to and from their work place on some kind of three-week cycle basis. I put it to the Government that this tax will encourage the kind of gypsy life that I have just been talking about. I instance the case in South Australia of the Olympic Dam development at the Roxby Downs uranium, copper and gold mine. Huge mineral development is about to take place and it will, no doubt, only reach its ultimate in the twenty-first century after many years of development. At present it has been given the go-ahead by the owners of the mine. In the future employers will be seeking to institute and establish houses for their employees. At present companies are thinking of establishing about 650 houses in that area. Because of the huge cost of erecting houses in that area and because of the fact that those houses will need to be sold to the employees of those companies at vastly discounted prices as normal employees would not be able to afford the cost of a developed house, we will find that the employer will be required not only to write off the loss of the subsidy to the employee, but also to pay the fringe benefits tax at a rate of 49 per cent. Where houses worth $90,000 are erected at Olympic Dam in South Australia and are sold to employees at, say $45,000, meaning a loss of $45,000, the fringe benefits tax will apply to that subsidy as well, as I understand it. As a result the cost to the employer will be $67,000. This is quite independent of the more normal situation where subsidised rents apply to employees who are provided housing. That will be an enormous burden on employers as well. One wonders what these companies are on about. We find these circumstances right throughout the community where the tax will be applied to employers. It will be catching fairly normal circumstances in everyday life. For instance, there is the caretaker living in and managing a building in the centre of town. There are those who live on premises and provide a 24-hour service because the employer needs to have people available. For instance, people in the nursing profession, or in the funeral director's business, where there may be a need to be called out at all hours of the night, can be encouraged to enter those occupations only by the provision of housing and/or expenditure support by way of subsidy for fuel and so on. We have the situation of people gaining a benefit by looking after and living on the properties of the National Trust. We have heard of circumstances where apparently the National Trust will have to pay the fringe benefits tax on the value of that employment. We have looked at the tourist industry and at those who are required to live in hotels and motels as managers of those operations. The benefit of their employment, both in terms of food and board and housing, will also be subject to the fringe benefits tax. My attention was drawn recently to the situation of a motel at Madura on the Adelaide to Perth road. Surely the Minister for Finance (Senator Walsh) knows of that town, it being part of his constituency. A large increase in traffic on the highway is expected in the years ahead, particularly in view of sporting events occurring in Western Australia. I am informed that that particular motel operation will have to employ another 20 staff. For the benefit of providing accommodation for those people for whom the nearest town is more than 200 kilometres away, another $105,000 will have to be paid for those staff to service the tourist customers. Obviously, there is a solution to that problem. The staff could be recruited from the nearest towns. They could commute from their town which is 200 kilometres away each day, and where they have their own homes, but obviously that is clearly impracticable, yet, that is one of the areas which could be exploited by people seeking to avoid these circumstances. Quite apart from those aspects there are, of course, live-in teachers who are living in boarding schools where the employers, the schools which employ those teachers, will be subject to the fringe benefits tax. There is a question of live-in supervisors of children living in houses with children. They may be looking after them as foster parents in homes which are run by organisations such as the Anglican Church. Those charities, as I understand it, will be subject to the fringe benefits tax as well. It is hard to see the logic of the Government taxing these kinds of benefits in the same way as the other kinds of benefits which have been the subject of debate tonight. Quite clearly, the Government is on the wrong track where it is forcing charities and organisations, which are relying on the goodwill of the public to provide funds so that they can serve the disadvantaged, to pay a further tax to the Government in order to be able to undertake the services which are so desperately needed. Those things have to be put in the callous category of this Government's action over the fringe benefits tax and clearly will be destructive in some of the very basic ideas on which our society has been developed. There are many other situations where housing will be subject to tax in the most unusual and unexpected ways. Of course, we have already discussed those relating to farmers and small business people, but I shall leave that to my colleagues to develop further. I indicate at this stage that the Government will be asked later in the debate on this area for a further explanation of the remarks by the Prime Minister (Mr Hawke) today, which were made public both in the Senate and in the House of Representatives, that there is intended to be some concession to farmers as a result of the Prime Minister's visit to Canowindra at the weekend. Senator Watson —He has denied it now. Senator MESSNER —Has he denied it now? That is interesting. Perhaps we can get on record from the Minister that, in fact, that is denied and that there will not be any further concessions made to farmers in these circumstances. I indicate that the Opposition will be opposing clauses 26 to 29. Senator WALTERS(Tasmania)(9.56) —I suppose the most unjust section of the Fringe Benefits Tax Assessment Bill 1986 is the one on housing fringe benefits. I have a document here which lists the costs to the farmer. I have underlined those parts of the legislation which will affect the rural community. I point out that the farmhand, the stationhand award wage is $238.10 a week. If we look at the value of farm accommodation using the Treasurer's figures of $40 a week we can add that to the $238.10. I have already added $24 for the meat, $10 for milk and the $10 for electricity which brings the weekly wage of that farmhand up to $322.10 a week. The average male adult minimum wage for the March quarter 1986 is $292.30. The average male adult earnings are, of course, much higher at $460. So we can see how without that additional farm accommodation, without the meat, without the milk or without the cow being agisted, the farmhand's wage would be lower than the average male adult weekly minimum award wage. The farmhand must have those benefits paid to him. But because the employer allows those benefits he will be forced to pay $1,592 a year additional tax on behalf of his employee. The injustice there can be pointed out. The employee is receiving the benefit as part of his wage and the farmer, the employer, pays the tax. There has never been a tax such as this in Australia where the employer pays tax on not something he is receiving but on a benefit, an income, which his employee is receiving. I have allowed for all those benefits such as the accommodation units on the farms to be considered under remote areas so that I err on the side of conservatism in that figure. I have also allowed for the $200 threshold a year which the Government allows. Yet we still have this grave injustice. I seek leave to have a document relating to costs to the farmer incorporated in Hansard. Leave granted. The document read as follows- FRINGE BENEFITS TAX COST PER FARM HAND Adult general station hand award wage... 238.10 Estimated value of on farm accommodation... 40.00 Meat 12Kg @ $2.00... 24.00 Other produce (Milk, Wood, Eggs etc)... 10.00 Electricity... 10.00 Total (per week)... $322.10 Average male adult weekly minimum award wage March qtr. 1986 [a]... 292.30 Average male adult earnings March qtr. 1986 [a]... 460.00 COST TO EMPLOYER PER FARM EMPLOYEE Rent, $40 x 52 x.60 (remote area rebate)... 1,248 Meat, 12Kg x 50 x $2.00... 1,200 Produce, $10 x 50... 500 Electricity $10 x 50... 500 Total Value of Fringe Benefit per annum... $3,448 Less $200.00 threshold... 200 Taxable Liability... $3,248 Fringe benefit tax payable per farm employee $3248 X .49... $1,592 For an average farm in Tasmania employing one person the Fringe Benefit Tax per farm will be $1592 For every employee working on a farm his employer will have to pay $1592 The highest award wage for a Station Hand employed under the Pastoral Award is $238.10. This wage is 18.5% below the Average male adult award wage in Australia. (actual 292.30) [a] The gross wage and benefit value paid to the same Station Hand shown above is $322.10 and is only 70% of the Average Adult Male Earnings per Week in Australia. (actual 460.50) [a] Tax payable (claiming concessional rebate only) [b] Wage p.w. Tax p.a. 322.10... 3,546.40 238.10... 2,171.00 If tax were payable in the hands of the employee the extra Tax collected would be... 1,375.40 [a] Parliamentary Library [b] Commissioner for Taxation Senator WALTERS —I point out that the Government, under the present system when the employer pays the tax, receives more than if the employee were paying the tax. That, I believe, is what the Government is all about. I have not used exaggerated figures. I ask the Minister again: Will he substantiate the figures which I have given? His officers will be able to work out just what I want to know. I ask the Minister to substantiate the figures. If he cannot, will he tell me where I have erred? I believe it is very important that the farming community knows just how much it will be up for. If it does not, it cannot do as the Minister suggests and cash out the benefits to its employees. I ask the Minister to verify the figures that I have put before him this evening. Senator KNOWLES(Western Australia)(10.01) —It was rather pleasing to see that the Minister woke up in the last 20 seconds of Senator Walters's speech because I think this is a very-- Senator Siddons —If the honourable senator- Senator KNOWLES —Well, I suppose that Senator Siddons has been asleep too because he is quite happy to cripple people in the community with this absolutely iniquitous tax. Senator Siddons —You just want the tax rorts to carry on, don't you? Senator KNOWLES —Honestly, the Australian Democrats have done a soft shoe shuffle over this whole thing. They are quite happy to place a millstone around the neck of business. We have already heard this evening my colleagues Senator Messner and Senator Walters speak quite eloquently about the effects of this rort on housing in the country areas and what the farmer is going to have to go through. I think included in this same net are private boarding schools where accommodation for staff is provided not as a means of avoiding tax but as a condition of employment. Parents are entitled to expect full supervision of their children. One major private school in Perth provides accommodation for the headmaster, his deputy, three boarding house masters, a matron, a chaplain, two other staff members with duties on site including supervision of the physical education centre and nine assistant house masters who receive board in return for performing supervisory duties. That is the only basis on which they receive board. A substantial amount of tax will now be payable in such cases. On one reckoning, it is at about $20,000. These people are being given accommodation in return for performing supervisory duties. Why should the schools have to pay that $20,000? The money may need to be found either by limiting staff employment in other areas or by raising fees to the detriment especially of country parents who are already struggling with costs. They are going to incur more and more costs. Senator Newman —They are anti private schools. Senator KNOWLES —Of course they are anti private schools. Senator Newman has quite rightly said that this Government is totally anti private schools. The Minister for Education (Senator Ryan) should be embarrassed wherever she goes because she knows jolly well that she is absolutely strangling private schools. Assessment of the value of this accommodation creates further difficulty. As with the case of housing in timber mill towns, accommodation units attached to boarding houses will have little practical rental market value. Yet, private schools are often situated in established inner suburbs with high property values. Where is the distinction drawn in this respect? This Hawke socialist Government cannot plead that it has ignored the question through administrative oversight. Sub-clause 27 (2) of the Fringe Benefits Tax Assessment Bill quite specifically states that any condition attached to employee occupancy of accommodation will not be taken into account. Where is the fairness in that? This Government has deliberately failed to make a distinction between an executive having free penthouse accommodation and a house master on continuous duty as a condition of his employment. We might ask whether the Minister for Education saw fit to object. I doubt whether she has. Senator Boswell —What about Kerin? He sells the farmers out all the time. Senator KNOWLES —We know that this whole Government has sold the farmers down the drain because they are least likely to vote for it. Let us face it, the Government will never do anything for people who are not likely to vote for it. Senator Siddons —Which clause of the Bill are you addressing now? Senator KNOWLES —If Senator Siddons was listening, he would know. The Minister for Education has in fact taken the view that this is quite a good way of taxing independent schools. Of course, many of the parents of boarders will not vote for the Australian Labor Party either. This is just another discipline and another cost on those parents. Of course, the absurdity of the legislation also extends to employees in hotels and in remote areas. For example, the north and south of Western Australia, which covers an enormous area, are in many instances already struggling because of competition in attracting tourism. It is absolutely essential that those areas remain competitive. This legislation will simply up their costs because employers will have to pay the staff who must remain on duty for 24 hours a day. This tax will simply be applied to them, even though there is absolutely no alternative. I would like the Minister to tell me-and presumably, like a lot of questions put to him, he will not answer this one-what this Government will do to exempt people, especially those in country areas, from the effects that such an iniquitous and unfair tax will have on housing. In summary, I ask the Committee to consider some of the areas that will be affected by this housing problem in the country and, in many cases, in the metropolitan area. I refer to schools, the mining industry, small and medium sized businesses, farmers, hoteliers, the National Trust and so many more. What is this Government going to do about this? Senator BROWNHILL(New South Wales)(10.06) —I would like the Minister to take note of some comments I wish to make on clauses 28 and 29. Clause 28 provides that the assessed market value of a house based on the consumer price index cannot be revalued again for 10 years. Surely it is rather anomalous that a house is not able to be revalued within a shorter period than that. Clause 29 defines `remote' as a dwelling more than 40 kilometres from a town of more than 14,000 people and beyond 100 kilometres from a city of 130,000 or more. Under that definition a lot of properties would not fall into the remote area bracket. Is the distance to be measured direct by road, by air miles or by the way the crow flies? Senator Knowles —By the way the Hawke flies. Senator BROWNHILL —It would be flying backwards and would not be measured in any miles at all. I would also like to bring to the attention of the Minister a point raised by Senator Messner earlier about employers who are forced by union awards to provide accommodation. I do not believe that this is fair to the employer. As I said in a speech I made the other night, accommodation has to be provided under an industry award in New South Wales. If one has to provide accommodation, why should one also have to pay a fringe benefit tax on that accommodation? This means that the trade union movement could at times hold employers to ransom. This Bill, which we have been talking about for quite a while tonight, will, we understand, raise about $320m in revenue in 1986-87, $500m in 1987-88 and probably more in later years. Senator Siddons has told us that he has saved the Government the need to raise a lot of that revenue. However, I somehow doubt that. Of course, in the last three years the Government has taken $440m away from the rural sector. Mr Kerin in his speech on 15 April supposedly gave us back $103m. Now the Government is taking away another $150m. So the rural community is not doing too well. Before I conclude my speech, I ask the Minister why he cannot at least allow the fringe benefits tax to be tax deductible? Why, one hopes, can he not exempt on-farm accommodation? Why can he not exempt the farm sector entirely? Senator PARER(Queensland)(10.10) —I would like to address just the fringe benefits tax as it applies to remote areas. I spoke earlier about the mining industry and I would like to refer to it again. As everyone knows, the mining industry has built probably more infrastructure over the past 20 years than any other grouping. It has built 24 new towns and has provided all the capital and running costs for water, power, communications, roads, railways and ports at no expense whatsoever to the taxpayer. It has done that because in all cases the places were remote and it was a method of attracting people to those areas to do the mining and to export our raw materials. The contribution of the mining industry, as the late Mr Connor and Mr Fitzgerald accepted, has been massive by way of exports, payroll taxes, royalties, direct taxation, export duties and rail freight charges, out of proportion to the demands of any other industry. Senator Walsh —Especially in Queensland. They have really ripped you off up there. Senator PARER —I will not disagree with that. Now the mining industry finds that it is to be hit with this fringe benefits tax which, when it is calculated, is really nothing more nor less than a new non-deductible export levy. We discussed the benefits earlier and the Minister for Finance (Senator Walsh) said: `Cash them out'. He knows that the benefits cannot be cashed out, but the companies can try. If they did that we would end up, because of the trade union control and the attitude of the people who work there, with enormous industrial dislocation. It would be so great that even Senator Walsh might be prompted to send another telex to the miners, similar to the one he sent about a month ago. Of course, people would not do that. The other alternative is to say: `Cash it out for an equivalent benefit'. The cost to industry of cashing out benefits for equivalent benefits would be so enormous that it cannot possibly be done. The mining industry is providing only facilities that are absolutely essential for the continuation of those projects. From my point of view this is a most iniquitous charge of approximately $61m on the mining industry and $15m on the Queensland coal industry. I ask the Minister to be honest and agree that this tax is nothing more nor less than a revenue collector. Again the mining industry has been picked out as a contributor. I move to local governments in remote areas, which must provide shire clerks, engineers and others with accommodation and in some cases have to provide return air fares to the capital city once a year. It is all very well to say: `Cash it out'; but who will pay the cash out? The ratepayers will have to pay or the service will be drastically reduced. If local governments do not provide the benefits they will not get these types of people to go to remote areas. Exactly the same situation applies to small business. I was recently in Mount Isa and received a telex, when the issue of fringe benefits tax came up, from a businessman in Mount Isa. He has 20 employees and has no option but to pay fringe benefits because it is a compounding sort of thing in those places, if one business pays it the others have to pay or they cannot get anyone to work for them. He said: This company cannot afford to employ people to complete non-productive Government business and we are being forced into a situation of having to seriously consider closing down, thereby putting another 20 people into the social security system. Please allow common sense to prevail and encourage people such as myself to work 80 hours a week for the common good. Teachers, policemen and other people are also transferred from the city areas. Their costs are higher, they are isolated and they must be given some special consideration which is now looked upon as a fringe benefit. If one gave most of those people a chance to go back to the city without those so-called fringe benefits, they would move back very quickly. Finally, is the Minister aware that there is a rumour of a challenge from the Premier of Queensland through the High Court of Australia under section 114 of the Constitution? I would like his views on whether he considers that such a challenge would be successful. Senator WATSON(Tasmania)(10.15) —The remarks of the Prime Minister (Mr Hawke) at the weekend placated the farmers. This matter was raised earlier by my colleague Senator Messner and he did not get a satisfactory response from the Minister for Finance (Senator Walsh). The Prime Minister's remarks placated the farmers because he gave an undertaking that he would review the position of fringe benefits taxes in relation to the rural sector. I now ask: What did the Prime Minister imply by the word `review'? What were the specific provisions in the fringe benefits tax legislation to which he referred? I presume that it was the housing benefits, the subject of the clause before us at the moment. What was the situation that prompted the Prime Minister to make this statement and why has the Treasurer (Mr Keating) nullified that statement by saying that the Prime Minister's remarks on the fringe benefits tax did not imply a change to the legislation? I ask: What did those remarks imply? I believe that the matter is so serious and has created such confusion that it would be only right and proper for the Opposition to take the position at this stage of the proceedings that progress should be reported until the Government can clarify this situation. Senator REID(Australian Capital Territory)(10.16) —In the second reading debate a number of speakers referred to the situation of the National Trust of Australia. The other day some controversy arose as to whether or not it was affected and one of the Government speakers suggested that, from his inquiries, it would not be. I refer to the housing benefits tax under clause 26. The National Trust of Australia has put out a Press statement and other literature in which it says: What is even more ironic is that the Commonwealth, as a result of this legislation, will be taking back in tax much of what it currently allocates to trusts in annual grants-in-aid. It has also said: In one stroke this legislation will decimate the National Trust's ability to publicly present, protect and care for key parts of the nations's National Estate. I think that the 80,000 members of the National Trust, of whom I am one, would be astonished to find that the Government is attacking the Trust in this way and I find it hard to believe that the Government really intended to do so. I wonder whether the Minister for Finance (Senator Walsh) will give an assurance that the amount that will be taken from the Trust in tax, if this legislation is passed, will be reimbursed to it so that it can continue the work it is doing. I seek leave to incorporate in Hansard a chart which has been prepared by the Trust. It refers to the six States and two Territories and lists the number of properties owned and/or managed by the Trust and the number currently affected by this housing fringe benefits tax. A total of 75 properties would be affected which, on its estimate after interpreting the Bill, would result in the Trust paying $123,000 per annum in fringe benefits tax. The chart also gives a brief resume of the effect that the Trust believes the tax would have on those properties. I seek leave to incorporate that chart. Leave granted. The chart read as follows- State No. of properties owned and or managed No. currently affected by fringe benefits tax Fringe benefits tax (estimate) Nature of effect on trusts New South Wales... 40 20 40,000 Certain restoration projects would not proceed Some properties now open to public would have to be closed Victoria... 64 13 30,000 Certain restoration projects would not proceed Some properties now open to public would have to be closed Queensland... 23 4 10,000 Likely reduced restoration, possible closures Tasmania... 20 3 15,000 No possibility of increasing income due to size of membership therefore restoration projects would be wound down Western Australia... 35 14 18,000 Likely to result in the closure of some properties South Australia... 80 21 28,000 Likely to result in the closure of some properties Northern Territory... 3 - - Probability of being unable to meet restoration programme Australian Capital Territory... - - - Total... 265 75 123,000 Senator REID —I hope the Minister will answer the question as to whether or not the Government will consider compensating the Trust for the loss which will be caused by the fringe benefits tax. Senator MICHAEL BAUME(New South Wales)(10.19) —I support the remarks of Senator Reid in relation to the National Trust of Australia. As a senator for New South Wales I have been approached by Mr James, the Executive Director of the National Trust in New South Wales, on this very topic. He has written to me outlining the concern the trust has because the provisions of this Bill have a detrimental effect-he says `albeit unintended'-on the National Trust. That is very kind of him. I do not think it is unintended at all, but he is very polite to this Government. The letter states: . . . albeit unintended effect on the National Trust which . . . is a non-profit organisation incorporated by an Act of the New South Wales Parliament. Of course, there are similar trusts in all States and Territories. They will also suffer, as Senator Reid said, the same difficulties as the National Trust in New South Wales. In New South Wales the National Trust owns over 30 properties. They are extremely valuable, at least from a national heritage point of view, if not necessarily from a market point of view, although many of them are very valuable from a market point of view as well. The letter continues: In order to keep a level of surveillance at each property, the Trust has the properties occupied free of charge to the Trust or at a minimal cost by custodians who, by their very presence, help to deter vandalism and ensure protection of the valuable collections in many of those properties. Anyone who has visited these properties in New South Wales-I see that Senator Puplick who is nodding his head is very concerned about this area-will be aware that there is a very strong need to ensure that these most valuable collections are protected and preserved. It is curious that the Government, which has all the rhetoric about conservation, arts and the environment, in this legislation is doing something which damages the capacity of the National Trust, which represents the efforts of individuals in our society to preserve that heritage. This effort is being diminished and damaged by a tax Bill which simply has not recognised in any way the damage that it does over such an enormous area of activity in Australia. As Mr James of the National Trust points out in his letter, the specific clause we are talking about-clause 25-is influenced by clause 137 defining salaries or wages and clause 148 defining the provision of benefits. But the important thing is that because of the wording of this Bill in all of these areas, the National Trust will become liable for tax on all such accommodation. The accommodation is there simply to preserve the assets of the Trust. Some of that accommodation on the open market would command very high rentals. I do not think any honourable senators would deny that the National Trust movement in Australia performs an enormously valuable service for the community. It relies on volunteers and other informal but nevertheless productive arrangements. The imposition of a fringe benefits tax in the areas which I have outlined tonight would clearly, according to the Executive Director of the National Trust in New South Wales, have a devastating impact. He stated: . . . have a devastating impact on this Trust's abilities to restore and conserve heritage items, by way of good, sound and economical property management. If the Trust is to be made liable- as it will under this Bill- for Fringe Benefits Tax on this type of accommodation it will, in many cases, for financial reasons have to either (a) close the property or (b) remove the Custodians (in many cases pensioners) and install security alarm systems such as those provided by commercial security companies. I agree with Mr James that this would be undesirable for a number of reasons. Mr James also points out: There are several other sections of the Bill which will, if applied to the Trust, result in a curbing of certain of the Trust's conservation activities because of the financial constraints the Bill will place upon the organization but none as drastic as that in relation to custodian's accommodation. For that reason I join Senator Reid in her very sensible request that the Government either does something about the National Trust by way of recompense or gets rid of that ludicrous clause. Senator WALTERS(Tasmania)(10.24) —During the debate on the fringe benefits tax legislation on 29 May, I pointed out the groups which would be affected by this fringe benefits tax. I stated: Schools and colleges where teachers live in, housekeepers-- Senator Chipp interjected: But they will not be now. Don't you know what the facts are? I ask Senator Siddons: What on earth was Senator Chipp referring to? Where was I wrong when I indicated that schools and colleges where teachers and housekeepers live in will be taxed? Are they now fixed by the Australian Democrats? I would be most interested if Senator Siddons could explain his Leader's anger, because he really spat out at me that I was wrong. He said: `Didn't I know the facts, that they will not now incur the fringe benefits tax?'. Senator NEWMAN(Tasmania)(10.25) —I draw the attention of the Committee and the Minister to the letter which the Commissioner of Taxation wrote to Mr Greg Smith of the Treasurer's Office on 28 May. I support my colleagues in the concern that they have expressed about the application of this fringe benefits tax to the National Trust. I therefore read part of the letter from the Commissioner. It states: The FBT rules specify that tax is payable on the market value of residential accommodation provided to employees. This would include persons such as caretakers of national trust buildings, lighthouse-keepers, etc. It has been proposed that national trust accommodation be exempt, on the grounds that the tax will reduce the amount available for restoration and maintenance etc. of the buildings. It has also been suggested that accommodation provided to persons who are required to live on premises as a condition of their employment (caretakers, hotel managers, lighthouse-keepers) should not be subject to FBT. We- I presume that this is the royal we- see no merit in either proposition. The Government has resisted the comparable argument of charitable organisations that they should be exempted from the tax because it would eat in the funds available for charitable activities. . . . FBT is effectively a tax on the remuneration of employees, and there is no reason in principle why the benefits of one class of employee should not bear the same tax as those of other employees. It would be difficult to give exemption to national trust bodies while holding the line on charities. I fear that the national trusts of Australia should not hold their breath, waiting to have special attention given to them, much as I urge the Government to do so. In light of that advice I fear that that will not be forthcoming. Before my time has expired, I draw the Minister's attention also to the answer which he should have given me earlier in the debate, which is relevant to clause 25. In the purpose prose of the lilac booklet, section 71 clearly states: A taxpayer housing fringe benefit arises where an employee, including members of the employee's family, is given by an employer the right to use a unit of accommodation as his or her usual place of residence. This includes the right to share accommodation with others. I do not have time tonight to go into this matter in the detail I would like. I will reserve my remarks for further debate. Senator TEAGUE(South Australia)(10.28) —I share the concern expressed by my Liberal Party colleagues who have spoken about the National Trust. I refer to South Australia where the same disadvantage will be suffered by this important Trust. I ask the Minister: Is there one citizen of Australia who has complained to the Australian Government that the National Trust is getting away with not paying some tax for the persons who act as wardens to assist the thousands of volunteers who are preserving the national heritage of Australia? Can the Minister name one Australian citizen who has complained, who sees some injustice in this National Trust being so able to place wardens in properties of great value which are protected by them? They are given the ability to be accommodated, sometimes in small circumstances, to provide this essential service. In South Australia there are 102 built and 34 natural heritage properties which are cared for by the National Trust of South Australia, according to a letter from the Director of the National Trust, Mr Hodson, which he sent to me and to my colleagues from South Australia. The direct result of this tax will be to deny the protection that these wardens are giving to these 18 properties. I urge the Government to change its intentions with regard to groups such as the National Trust so that it is clear that the Government is in line with the feelings of Australians who want to be fair about this matter. Senator BOSWELL(Queensland)(10.29) —I wanted to make some comments earlier tonight regarding the tax on government housing. Before I do, I wish to mention the Canowindra disaster. The Prime Minister (Mr Hawke) should be condemned in the strongest terms. The Prime Minister went there and said that he would look into the matter. A thousand people took the Prime Minister at his word because he is the Prime Minister of Australia. They listened to him. Then he came back here-- The TEMPORARY CHAIRMAN(Senator MacGibbon) —Order! It being 10.30 p.m., under sessional order I put the question: That the Temporary Chairman do now leave the Chair and report to the Senate. Question resolved in the affirmative. The Temporary Chairman having reported accordingly- The PRESIDENT —Order! The question is: That the Senate do now adjourn. Senator CROWLEY(South Australia)(10.30) —I rise this evening to draw attention to a report which, in the normal course of events, would have been tabled in the Senate, but, due to a decision of this House that Government Business should take priority, the report will not be discussed in this session. I did not want to miss the opportunity to speak on it. The report is the report of the Aboriginal Women's Task Force, entitled `Women's business', and is from the Department of the Prime Minister and Cabinet through the Office of the Status of Women. I begin by commending this report to anyone with any interest in Aboriginal affairs and in particular in the concerns facing Aboriginal women. It is an excellent report and it includes the history of the way in which governments, Federal, State and territorial, have dealt with the Aboriginal people since the arrival of white settlement in this country. As an introductory historical document-the report makes no claims to being conclusive-it is invaluable and I suggest that any number of people in our community might do well to read a copy of the report if for no other reason than to learn the Aboriginal history contained therein. It could be said that this is a history of white failure of the Aboriginal people over almost 200 years of white settlement in this country. The report should also be commended for the comprehensiveness of its coverage not only in the areas addressed, but also in the areas of Australia that were visited by the Task Force. The map on page XII shows the many communities which the Task Force visited. The map of Australia was very well covered judging by all the dots that are shown. I also commend the many people involved in the Aboriginal Women's Task Force, particularly in the campaign to get a task force established in the first place, and that has a long history which is neatly documented in this report. It includes a small historical report of the struggle of Aboriginal women and the efforts they have made to get a formal hearing and acceptance by government. That campaign started in the years of the Fraser Government and was completed under this Government which, in effect, went ahead and comprehensively sponsored the Aboriginal Women's Task Force. I believe the Government is pleased to receive this report and its recommendations. There is one particular chapter which is worthy of consideration here-perhaps we should never forget it. On page 22 of the report the following is written: After 197 years of white settlement, this is the statistical profile of the descendants of the people who have lived in this country for at least 40,000 years: an infant mortality rate three or four times greater than that of all Australians; life expectancy about 20 years less than that of all Australians; a median family income slightly more than half of that of other Australians; an unemployment rate that has tripled since 1971 to be four times that of other Australians; a disproportionate number of uneducated, under-educated and imprisoned. Then there is the fact that they continue to be victims of an astonishing legal fiction-that the land when Captain Cook `discovered' it was `terra nullius', no-one's land. That paragraph and the statistical information there is elaborated upon in the back of the report in one of the many comprehensive appendices. Apart from recommending that everybody look at this section, I wish to allude particularly to one point-the figures on infant mortality rates. Some people might worry that these figures are out of date. Indeed they are not; they take us up to 1982. The way in which infant mortality is recorded is by the number of deaths per 1,000 births. In 1976 in Queensland 65.9 Aboriginal children died per 1,000 births. That figure had fallen to 23.6 in 1982. In the Northern Territory in 1976 was 52.8 and this had fallen to 38.3 in 1982. Just again for the record, more than 38 Aboriginal babies per 1,000 births die within the first year of their life. That figure needs to be compared with the overall mortality figure for Australians in general. That mortality rate is 10.3 per 1,000 live births, compared with 38.3 for Northern Territory Aboriginal infants. We must remember that the 10.3 figure for live births in Australia actually includes that horrifically high Aboriginal figure. Therefore, a white baby's chances of survival are more than four times that of an Aboriginal baby. To put it in reverse, an Aboriginal baby born in the Northern Territory is four times more likely to die before its first birthday than a non-Aboriginal. If nothing else this whole report is worth while for recalling to the Senate that quite horrific statistic. That has happened in a country which has boasted the lowest or the near lowest infant mortality figure for at least the past 20 years or so. Australia's figure is very low-a matter of real pride-but we still know that that figure hides a shockingly high Aboriginal neo-natal mortality rate. That is not the principal point in the report but it is one that cannot be missed in looking at this very comprehensive study of all the issues facing Aboriginal women. The question of Aboriginal women's health is a particular matter that is raised but the terms of reference for the Task Force were far greater than that. They included land rights, the right to education, housing and so on. However, that matter of health stands out. A society which copes so comprehensively with health matters for its urban and white population should seriously address these problems when they relate to its Aboriginal population. We do not need any magic potions to reduce the mortality rate among Aboriginal people; we need accessible and ordinary health care-the management of gastro-enteritis, of childhood infections, of adequate ante-natal care and of the diet of mothers. These are very simple, common sense matters of basic general health. As a priority we should insist on quickly addressing such problems. I would not like this to be the only issue that is addressed as a result of this report but it is certainly an important one. The recommendations are comprehensive and housing is very high on the priority list. It is not surprising that that should be so, given the report's description of the housing provisions for Aboriginal people. The area of education again produces a comprehensive series of recommendations as do health and, the question of fostering and adoption, which is a matter of importance for Aboriginal people who are concerned with the difficulties faced as a result of white adoption of Aboriginal children and the resulting possibility of the loss of Aboriginal culture to those children. Any number of illustrations, which we could all cite, point to why this was one of the terms of reference which was so comprehensively addressed in this report. The problems of employment, crime, punishment, legal aid, land rights and community services are all addressed. The report points out what some of us are already aware of, that one cannot expect to look at any one aspect of Aboriginal women's concerns without looking at the whole of the problems that I have just cited. All of those things intertwine both in cause and effect and the report goes to a request, in effect, for government to address the recommendations in the comprehensive way proposed in the report. I most seriously recommend this report to the Senate. I think it is, if nothing else, an excellent reference but, more importantly, I think it calls to our attention the needs of Aboriginal women. The point raised in the report that Aboriginal women were finally spoken to and had the opportunity to make their voice heard is a very significant one. Again, the report quotes Aboriginal women who have said: `We have not been asked much before, but even when we were it was white people asking us and we were shy and felt unable to answer. We are pleased to be able to make our comments because we are telling other black women, and they can take our message'. There is a sense in which this report appreciates that dimension of Aboriginal women and the fact that they are reticent or shy to put their case. The task force as it was established has been able to meet with and hear from those women and take into account all those things that Aboriginal women around Australia have said. I think it is an excellent report. I congratulate those people who produced it, and I will be interested to hear the Government's response to it. Senator VANSTONE(South Australia)(10.41) —Every now and then a small point needs to be made which at first sight appears to have no substance whatsoever and to be totally flippant. These small points can hang around in one's mind until they get to the stage where they need to be made. The point I wish to raise tonight is one such matter. I wish to raise the question of the provision of a particular service to senators by the Joint House Department; namely, the offer of cut flowers in one's room. I note that the newly issued edition of `Services to Senators and Members' still includes the offer of this service. I personally think it is a somewhat quaint service to still be offering in the 1980s. I am not at all sure that it should be available to senators and members in the first place, saving and except for Ministers and Presiding Officers. I could do without it and I know that plenty of other senators could as well. In fact, at the moment they are doing without it. Nonetheless, the offer is there. The gardeners are employed, the vases have been purchased and the service is offered. On that basis, last year on entering the Senate I decided to make use of this service, however briefly that use might end up being. Later in the year the service stopped. After a couple of weeks, inquiries were made as to why the service had stopped, and I was told that it was because of a shortage of flowers. This seems fair and equitable. If there is a shortage of flowers, naturally the supply of cut flowers to senators and members officers will stop. I had noticed, however, that the shortage was not of such extreme proportions as to prevent Joint House offices at the end of the Senate transport corridor being adequately supplied with flowers. I say `offices' to indicate that I am not simply referring to the office of the Secretary to the Joint House Department but to the entire collection of offices at the end of the Senate corridor. Being new, and having the reticence in a number of areas that all new people have, I decided to say nothing, thinking it was better to work out the system before making a comment. Before I go on, I do not wish to be seen as doing a disservice to the Joint House Department. There is the possibility that all of the flowers in that area came from a private garden, or that the officers did a whip round for petty cash and sent someone off to the florist. All the flowers were the same. They all came from the same place, or they appeared to be of the same nature, and they had a remarkable similarity to those flowers in the garden. Nonetheless, if they came from a private garden or if the officers did a whip-around and supplied themselves in time of shortage and need, good luck to them and I withdraw any inference that someone may draw from the comments that I have made thus far. Time passed on and upon a visit to the photostat machine at the end of the Senate transport corridor I noticed a large tin of roses-several dozen in fact-in the little Joint House office that used to be used to accommodate the photostat machine, which, burgeoning bureaucracy being what it is these days, is now out in the corridor. Being naturally blessed, or inflicted, depending on which way one likes to look at it, with a loud voice, I commented on how lovely the roses were and asked whether I could have a few of them, because it was a big tin, to take to my office and put in the vase that had been supplied for me. With frightening speed-I use that word advisedly-someone came out of the Joint House Office, someone now known to me as the secretary to the Secretary to the Joint House Department. It was clearly explained to me that I could not have any of those flowers; they were for the Joint House Department. I could look, but not touch. Like a child, I accepted the comments and returned to my duties, not thinking much of it. But when this year's session began the shortage of flowers did not appear to have gone away. Further inquiries were made, including a telephone call by me to the Joint House Secretary, as I wished now to complain. Joint House had flowers and I did not. The secretary to the Secretary inquired as to the subject matter I wanted to raise with the Secretary. I said, quite simply, `flowers'. When pressed, I indicated that-- Senator Aulich —Pressed flowers? Senator VANSTONE —When I was pressed as to the further nature of the subject I wished to raise, I indicated that it was the lack thereof. Once again, the shortage excuse was drummed up. This shortage was now of disastrous proportions. We had moved from October and were now in April. Either a plague of locusts had eaten all the flowers between October and April, a period of seven months, or something else had happened. With the brazenness that a second-year junior back bencher acquires, I spoke out this time and pointed out that the shortage did not appear to me to be of such disastrous proportions as to deprive the Joint House offices of these flowers. I got what I thought and still think was a fairly stunning response. With some surprise in the voice of the speaker on the other end of the phone, I was told almost: `Well, of course; the Secretary to the Joint House Department is more important than any senator or member'. I sort of chuckled in some disbelief and pointed out that as I did not as readily come to the same conclusion, I would still like to catch up with the Secretary to the Joint House Department. In fact, I do not come to that conclusion at all. The secretary to the Secretary told me that she would speak to the gardener. I was at a loss to see why this disastrous shortage of flowers would suddenly be the gardener's fault. I do not know whose fault it is and I do not wish to draw any inference as to whose fault it is. Nonetheless, half an hour after this conversation, flowers arrived in my room. They were in near full bloom by the end of the week. Not wishing to throw them out when they were in near full bloom, when I departed for my electorate I left them in my room. By the time I returned, they were crisp in the vase. This may say something about the cleaning capacity of the Joint House Department. On the second occasion this year I have returned, having left flowers in perfectly good condition in a vase to find them crisp in the vase exactly where I left them, with the water in a state of odour that can be described only as not very pleasant. Two days later the secretary to the Secretary to the Joint House Department very courteously rang me to advise me that the Secretary was free. I mentioned that I had someone with me and, in fact, I had to do this a couple of times to make it clear that there was no way I was going to the secretary's office then and there just because the Secretary was free. I understand that the matter of service of cut flowers has been raised at the Joint House committee meetings because, I understand, I am not the only senator who believes that if a service is offered it should be provided or, alternatively, it should not be offered. Other senators have told me the story of a particular senator, I think known to everyone here, who was caught in the garden with a pair of secateurs and figuratively speaking, of course, was pounced on by the gardener. A senator in the garden with secateurs working on the self-supply principle for flowers is not a pleasant sight for a gardener. The gardener came up and exclaimed: `I am supposed to do that'. The senator replied `I know', went on cutting the flowers and took them back to the said senator's office. I am sure that the point I am making tonight is not lost. It is not a question of whether or not senators should be supplied with flowers. Let me summarise by saying this: As I said before, I do not think the service is a necessary one except for Ministers and Presiding Officers. Secondly, if the service is to be offered it should be provided properly. Thirdly, it is not my belief that senators, members and the Joint House Department all came into being at the same time and the argument of which came first-the chicken or the egg-simply does not apply in the case of those three categories. That fact should be drawn to the attention of those in the Joint House Department who may be of a different view. I point out that I looked today to confirm whether or not the Joint House Department offices were still amply supplied with flowers. As I went after a certain time this evening, I discovered that all the Joint House Department offices were locked. Staff of the Department had gone home. So I cannot inform the Senate whether those offices are still being supplied with flowers, when I know that I am not and that other senators who have put in a request to make use of the service that is offered in this beautiful leaflet that is sent around are also not being supplied with flowers. Senator PETER BAUME(New South Wales)(10.51) —I want to say a few words tonight about a complaint I have received from Mr Russell Hancock, a resident of Parramatta in the west of the city of Sydney. Before I do, I wish to follow up something that was said by Senator Vanstone. You will recall, Mr President, the saga of how honourable senators obtained Commander telephone systems. Senator Vanstone may not know but some years ago I became aware that officers of the Joint House Department had Commander telephone systems while honourable senators did not. Rather than making a speech in the Senate on the adjournment debate, I remember that I went to the relevant Estimates Committee hearing and I was able to ask the Joint House Department officers about the merits of Commander telephone systems and whether they had something to offer. Senator Crowley —We will all await Senator Vanstone's examination of the estimates of God knows what at the next session. Senator PETER BAUME —Nevertheless, Joint House Department officers assured me that the Commander telephones did have merit and did have advantages. I then asked whether the officers had those systems themselves. They did indeed. I asked whether Mr President had a Commander telephone. I was told that Mr President did not. I know that within an hour and a half I had an automatic dialling telephone. The PRESIDENT —So did I. Senator PETER BAUME —So did Mr President. It is amazing how quickly things move. It may be a good idea for the Joint House Department to realise that it is there to serve us and not vice versa. I come back to Mr Russell Hancock. He has experienced some long running battles with the Commissioner of Taxation and, more recently, with the Commonwealth Reporting Service. I want to raise his problem because he believes he has been the victim of a conspiracy. He has asked me as a senator to lay on the record some of the facts. He says that he has been treated badly by those in authority. Indeed, he seems to have been shown scant respect. If his story is correct, it suggests that Shakespeare's words about the calumny of power may operate here if in fact he has been unable to get the kind of satisfaction that he has sought. In the last year or so, I have had some problems in obtaining information from some departments under provisions of the Freedom of Information Act. Owing to a great readiness to use the Administrative Appeals Tribunal, I have discovered that that is the stick sufficient to get information out. Only last week, I sought the release of information concerning possible migration of nazis to Australia. That information was only obtained through using the Freedom of Information Act and putting various other pressures on departments. Nevertheless, I come back to Mr Hancock. The case he put to me is one which is disturbing. I ask the Minister for Education (Senator Ryan) whether she will at least have the matter put before the relevant Minister after I have set it out, because the facts are significant and Mr Hancock may have a complaint. The situation simply is that Mr Hancock sold some shares at the time of the 1970s mining boom. The Taxation Commissioner raised an assessment indicating that the profit on the sale of the shares would be taxable. That became an issue of contention between them. Mr Hancock appealed to the Taxation Board of Review. This appeal was successful and, after negotiations, the tax payable was reduced to a very small amount. The conduct of this appeal before the Board of Review is the main concern that Mr Hancock has continued to pursue. He maintains, not that the decision was a bad decision, because he won his appeal, but that the transcript of evidence taken by the tribunal was tampered with. So he applied for access to the original tapes to check them against the transcripts which he had received and which purported to be transcripts of the appeal proceedings. He was then told that the tapes had been destroyed in line with normal procedure. As Mr Hancock sought access to the tapes under freedom of information legislation, and as they could not be supplied to him, he was able to seek a hearing before the Administrative Appeals Tribunal to find out whether the tapes had really been destroyed and, if so, in what circumstances. Here is the issue: A citizen says that a transcript which purports to be a transcript of what transpired before the tribunal is in fact not an accurate transcript, so he wants to check it against the tapes. Mr Hancock was able to point to records disposal schedule No. S393 put out by the Australian Archives which identifies the procedures for the erasure of tapes. He and the Commonwealth Reporting Service strongly disagree on the interpretation of that schedule. Mr Hancock claims that the Reporting Service is bound to notify Archives of the destruction of a tape. The Commonwealth Reporting Service claims that it does not destroy used tapes but it merely `bulk erases' them after a set time like two to three months. I suppose that that is not destruction, but it certainly destroys what is on the tapes. For the purposes we are talking about it in fact is destruction. The Reporting Service says that the written transcription is the master copy and that it does not keep records of the destruction or the erasure of the tapes. This statement is disputed by Mr Hancock, who cites a conversation with a now deceased officer of the Commonwealth Reporting Service, a Mr MacDonald, formerly Principal Reporter of that Service in New South Wales, who told him that a copy of the tape was kept for a longer period than two to three months. That extra copy appears to have been kept by the Taxation Board of Review in Mr Hancock's case. So here we have a transcript. We have Mr Hancock believing that it is not an accurate transcript. He wants to get the the original tape. He believes a second copy is in existence, and he applies for it. He says that he believes that the master tape was destroyed one or two days after he made an approach to the Ombudsman to see whether he could obtain it from the Taxation Board of Review. That is a bit rough. A person who is just a private citizen goes to the Ombudsman, and the tape in question is immediately destroyed. Mr Hancock has told me that Mr Richardson, the Ombudsman, made a telephone call to the Commonwealth Reporting Service on Monday, 5 May 1980, asking for access to the relevant tape, and the tape was destroyed by erasure on either Tuesday, 6 May or Wednesday, 7 May, according to information alleged by Mr Hancock and presented to me. So that is the story. Three questions really need to be answered. Was the transcript of Mr Hancock's appearance before the Taxation Board of Review edited so as to change the sense of the actual presentation of the material at that hearing? That is the first question. The second question is: Was a tape of that hearing deliberately destroyed after it became known that Mr Hancock was seeking it through the Ombudsman in order to check it against the transcript he had received? Thirdly, should the Commonwealth Reporting Service notify Archives when it undertakes what it describes as `bulk erasure' of tapes, which really seems to me to be destruction of the material on the tapes? I have an open mind on the matter, but these questions should be answered quite definitely, because some citizens may feel that they have not had due process offered to them. We have to remember that most transcripts, in the same way as is Hansard, are edited to tidy up language, but they are not supposed to be edited to alter the sense of what has been said. Mr Hancock claims that the sense of what was said at the Board of Review hearing was altered. He is not complaining about tidying up, but about any alteration of sense. He is complaining not only that there was no tape against which he could check the transcript, but also that, when he went to the Ombudsman, he believed the only existing tape was deliberately and immediately destroyed. I have in my possession extremely detailed records from my constituent which I would gladly make available to Senator Ryan or to departmental officers if it is their desire to get more information, but I have no doubt that they know Mr Hancock and his case quite well. I wonder whether those three questions could be answered and whether the Attorney-General (Mr Lionel Bowen) or the Treasurer (Mr Keating), depending on whether one goes down the taxation road or the Commonwealth Reporting Service road, could look into the matters and at the three questions I asked and take the appropriate action to make sure that, if another Mr Hancock appears and if another question is raised as to the accuracy of a transcript of a hearing before a board of review, the plaintiff, the person who has actually sought the review, is able to receive speedy and helpful advice and access to the tapes in order to check whether or not what that person said at the review hearing is in fact accurate. Senator RYAN(Australian Capital Territory-Minister for Education)(11.00) —Senator Crowley made some comments on the Aboriginal Women's Task Force report and Senator Vanstone raised matters concerning the provision of flowers to senators and members. Their views have been noted. In response to Senator Peter Baume's raising of the issue of his constituent in taxation matters, I will ensure that his questions are passed on to the Treasurer (Mr Keating) for response. The PRESIDENT —In respect of the matter raised by Senator Vanstone I can tell her that, as she has said, the subject of cut flowers was raised at the last meeting of the Joint House Committee, which was held about a month ago. Following the matter being raised at that Committee, Madam Speaker and I undertook to discuss the matter with officers of the Joint House Department. That we have done and a recommendation will be going to the Joint House Committee at its next meeting which takes place, I think, this coming Wednesday morning. I will let the honourable senator know the results of the consideration of the matter by the Joint House Committee at the earliest opportunity thereafter. I also say to Senator Vanstone that, if at any time she wants to put a case to me on any matter concerning the administration of the Parliament which is within my purview and that of Madam Speaker, my door is always open to her. Question resolved in the affirmative. Senate adjourned at 11.02 p.m. The following answers to questions were circulated: (Question No. 751) Senator Vigor asked the Minister for Community Services, upon notice, on 4 December 1985: (1) How can the following figures which appear in the `Child-Care Up-Date' publication of the Department of Community Services be reconciled- (a) about 5000 families (about 6 per cent of all those using centres); (b) a further 9000 families (or 10 per cent); and (c) about 1600 or less than one per cent of all users of Commonwealth funded child care. (2) Does the error mean that the figure of $10.2m in projected savings is inaccurate. (3) Which groups and associations were consulted over the new funding arrangements for child-care centres, and what form did those consultations take, and when were they held. (4) When the Department of Community Services analyses the effect of the new funding arrangements, did it use the raw estimates that came from the November 1984 Australian Bureau of Statistics survey of 25 per cent of child-care centres, or did it apply a factor for increased costs in the new year; if such a factor was applied, what was it, and how was it determined. (5) How much extra revenue is expected to be raised in 1985-86 and 1986-87 as a result of the $2 increase in the base for weekly child-care payments. (6) What overall savings or increased costs excluding this $2 increase in the base of the fee structure are expected to be experienced in 1985-86 and 1986-87 by child-care users in the following assessed family income groups (a) $200-299; (b) $300-399; (c) 400-499; (d) $500-599; (e) $600-699; (f) $700-799; (g) at least $800 weekly. Senator Grimes —The answer to the honourable senator's question is as follows: (1) The percentages are rounded and were intended only to provide a broad indication of the impact of the revised arrangements. (2) No. (3) There is close and continuous consultation with child care services and child care groups. The philosophic principles underpinning the review into funding arrangements were publicly announced. Many groups conveyed their views and these were taken into account. (4) Various data sources were used to analyse the effect of the revised subsidy arrangements. The analysis was based on current prices. (5) 1985-86-$0.475m 1986-87-$1.425m. (6) The increased costs or savings experienced by child care users depends on the operating practices of particular services, the income of the family, the number of children in the family, the hours of care used and the fee structure of the service. The following table shows the fee impact for a service with an average fee for a family with one child in care using 40 hours of care. Assessed Family Income (AFI) Fee Change (a) AFI $200-299... No increase other than $2 increase in minimum fee (b) AFI $300-399... No increase other than $2 increase in minimum fee (c) AFI $400-499... 400-467 no increase other than $2 increase in minimum fee 467-499 slight decrease due to change of withdrawal rate but dependent upon the approved fee for the service (d) AFI 500-599 (e) AFI 600-699 (f) AFI 700-799 (g) AFI 800 + Increase depends upon the previous and new fee for the particular centre (Question No. 1029) Senator Reid asked the Minister for Community Services, upon notice, on 17 April 1986: (1) How many submissions were received from organizations in the Australian Capital Territory (ACT) in 1985 for Capital Funding under the Aged or Disabled Persons Accommodation Program. (2) Which were the organizations concerned. (3) Which of those in paragraph (2) received funding. (4) Which of those in paragraph (2) did not receive funding and why in each case was that so, in view of the needs of the aged and disabled in the ACT. Senator Grimes —The answer to the honourable senator's question is as follows: This question has been previously answered as question 993 in Senate Hansard of 6 May 1986, page 2479. Senator Walsh —On 13 March 1986 (Hansard, page 970), Senator Walters asked me a number of related questions, without notice, in my capacity as Minister representing the Minister for Primary Industry in the Senate. Senator Walters's questions concerned forestry activities in Tasmania and the conclusion of an agreement between the Commonwealth and Tasmania associated with the Commonwealth's recent decision to renew woodchip export licences for the State. The Minister for Primary Industry has supplied the following answer to the honourable senator's questions: The Premier of Tasmania, Mr Gray, forwarded me a signed copy of a proposed Memorandum of Understanding (MOU) between our Governments dated 9 January 1986. It is intended that the MOU, along with export licence conditions, will provide the means of implementing the Commonwealth's strict environmental controls to be imposed on woodchipping and associated forest activities in Tasmania. However, the signing of the MOU by the Premier was premature as important issues to be addressed in the MOU had not been fully resolved at that time. Senator Walters is not correct in saying that since January I have attempted to go back on agreement reached with Premier Gray by seeking to interfere with domestic forest operations in Tasmania. I assume Senator Walters is referring to the issue of forest operations in areas on the register of the National Estate. The Commonwealth in this respect has at all times been concerned to ensure, through the MOU, that Tasmania takes full account of the National Estate values in planning forest operations, be they for export or domestic purposes. The Commonwealth is aiming to achieve its objective of protecting all environmental values, including those of national estate areas, while at the same time allowing woodchip export operations to continue in Tasmania, through a rational and professional process of consultation and agreement between the two Governments. This is reflected in the MOU itself which, I expect, will be finalised shortly. Senator Walters may also wish to refer to my response to a Question Without Notice in the House of Representatives on 13 March 1986 on the same subject (Hansard page 1306). Senator Walsh —On 5 May 1986 (Hansard, page 2330), Senator Crichton-Browne asked me a question, without notice, in my capacity as Minister representing the Minister for Primary Industry in the Senate. His question concerned whether the Government has been able to confirm press reports of United States sales of rice to Papua New Guinea and action the Government is likely or able to take in respect of the matter. The Minister for Primary Industry has supplied me with the following additional information. As of 20 May 1986, no sales of US rice to Papua New Guinea had been reported by the US Department of Agriculture. Australian officials in the US are maintaining contact with US officials in this regard. The purported rice sale to Papua New Guinea would be facilitated by US Government subsidies. In respect of rice, the subsidy of particular concern arises from the ``marketing loan'' provisions of the US Farm Bill rice program. These allow farmers participating in the program to repay Government loans at less than face value when, as is currently the case, the world market price is less than the mandated loan rate. In these circumstances, there is no mechanism to prevent particular markets being affected, unlike the export enhancement program in respect of which specific assurances were given to the Prime Minister during his recent visit to the US. It remains of serious concern, however, that subsidised US rice could severely disrupt Australian rice exports to traditional markets. The Government will be using all appropriate avenues in bringing our concern to the attention of the US Government.