Wednesday, 4 June 1986 The PRESIDENT (Senator the Hon. Douglas McClelland) took the chair at 10 a.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 Parliament assembled. The petition of the undersigned shows: That the Bill of Rights Bill, the Human Rights and Equal Opportunity Commission Bill, the Human Rights and Equal Opportunity Commission Amendment Bill and the Human Rights and Equal Opportunity Commission (Transitional Provisions and Consequential Amendments) Bill, if passed by the Parliament, will undermine human and civil rights in Australia; will attack the institution of the family in our country, and will destroy States rights and the federal nature of our Commonwealth. Your petitioners humbly pray that the Senate, in Parliament assembled, should reject these Bills; abolish the Human Rights and Equal Opportunity Commission and move to withdraw ratification of the International Covenant on Civil and Political Rights. And your petitioners as in duty bound will ever pray. by Senator Collard (from 68 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 59 citizens). To the Honourable the President and members of the Senate in Parliament assembled. This petition of concern to Australian citizens asks that: 1. The Australian Government exert pressure on Moscow to- (a) Allow the International Atomic Energy Commission full expert investigation of the Chernobyl nuclear disaster and its human consequences; (b) Allow Australian Ukranians to send medical aid to family and friends in Soviet Ukraine; and, (c) Allow free communication between Australian and Soviet Ukrainians. 2. The Australian Government- (a) Launch a public appeal to help the Cher- nobyl victims; (b) Support the removal of Russian nuclear weapons out of Ukraine; (c) Support the decolonization of the USSR so that captive nations like Ukraine and the Baltic states are not exploited for Soviet Russian nuclear purposes. And your petitioners as in duty bound will ever pray. by Senator Chaney (from 117 citizens). To the Honourable the President and members of the Senate in the Parliament assembled. The petition of certain citizens of the Northern Territory 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 pastoral and rural sector, which will severely affect its long-term viability. That the delay by the Government in introducing the legislation into Parliament is causing confusion and hindering the man on the land in the organisation of his affairs. Your petitioners humbly pray that the Government introduces the Capital Gains Tax legislation without delay and that the Australian Democrats join with the Opposition to defeat the proposed legislation. by Senator Reid (from 27 citizens). To the Honourable the President and members of the Senate in the Parliament assembled. The humble petition of the undersigned citizens of Australia showeth that whereas: 1. The present Australian national flag is not distinctively and uniquely Australian and is confused with other national flags. 2. The people of Australia have never had an opportunity to express their views on an appropriate Australian national flag in a referendum. 3. The present Australian national flag does not properly represent Australia as a sovereign, independent nation. 4. The present Australian national flag falsely proclaims Australia as a colony, homeland, protectorate, dominion or government department of Great Britain. 5. The first condition in the flag competition of 1901 required that the design should show Australia's loyalty to the British Empire. The British Empire no longer exists. 6. A public opinion poll held in 1984 using the Gallup Method revealed that 52% of Australians surveyed wanted a competition for a new design for the Australian flag. 7. There is no inherent link between Australia proclaiming a unique and distinctive flag and the political issue of Australia moving to a republican form of government. 8. The adoption of a truly Australian national flag would serve as a focal point for Australia's bicentennial celebrations in 1988. Your petitioners therefore pray that your honourable House will: (a) Appoint a Committee of the Parliament with representatives from both Houses and all parties to invite and consider proposals for the design of a new Australian national flag, and (b) Require that Committee to make recommendations on the form of a minimum cost referendum at the time of the next general elections, in which the electors will be given the opportunity to vote for a flag from a selection of at least three designs which will include the present Australian national flag and the winner of the Ausflag-Bulletin-2MMM.FM competition of March 1985. And your petitioners as in duty bound will ever pray. by Senator Sir John Carrick (from four citizens). To the Honourable the President and members of the Senate in the Parliament assembled. The petition of the undersigned shows: That we urge you to oppose the Australian Bill of Rights Bill because: We get no legally enforceable rights under the Bill. The Bill does not guarantee vital rights such as the right not to belong to a trade union, the right to own private property and not be deprived of it without just compensation and the right of choice between Government and non-Government schools. The Bill gives Canberra extra powers to change our Federal system by the back door without a constitutional referendum. The Bill gives dangerous new powers to a Federal Government Commission. Your petitioners ask that the Senate, in Parliament assembled, should vote against the Bill of Rights, support Opposition amendments and seek a genuine public debate and a referendum on the Bill. And your petitioners as in duty bound will ever pray. by Senator Reid (from 60 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned citizens of Australia shows that the proposed Fringe Benefits Tax recently introduced into the House of Representatives by the Labor Government will increase the costs and inhibit future growth of small business in this great nation. Your petitioners request that the Senate in Parliament assembled should reject this regressive Legislation as a matter of utmost urgency in the interests of the well being of all Australians. And your petitioners as in duty bound will ever pray. by Senator Walters (from 1,581 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: (1) That we the undersigned are totally opposed to the introduction of a $2.00 fee on prescription drugs for pensioners; (2) That the impact of such a fee will be particularly felt by the chronically ill elderly who will be faced with a $2.00 burden with the purchase of each Pharmaceutical Benefit Scheme drug; Your petitioners therefore urge the Senate and the Government of the Commonwealth to ensure that prescription drugs continue to be provided to the pensioner population without the $2.00 fee on each prescription. And your petitioners as in duty bound will ever pray. by Senator Reid (from 12 citizens). To the Honourable the President in the Senate and the honourable members of the Senate in the Parliament assembled. The humble petition of the undersigned electors of the Commonwealth of Australia respectfully showeth that: The Rotary Youth Bank/Waverley Employment Resource Centre should be fully funded by the Commonwealth Government of Australia in its own right as a highly successful Employment Training Scheme, giving the unemployed of all ages the opportunity to be counselled, trained, and directed into the workforce. The consistently high level of 76% employment placement rate of participants over 24 months deems this scheme unique and worthy of Government endorsement and funding. Your petitioners therefore pray that your honourable Senators will with the utmost of urgency both endorse and fully fund on an annual basis the unique and highly successful Rotary Youth Bank/Waverley Employment Resource Centre Employment and Training Scheme. And your petitioners as in duty bound will ever pray. by Senator Cooney (from 368 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned citizens of Australia respectfully showeth that: whereas the Federal Government is spending increasing amounts to alleviate damage done to human lives by family break-up, desertion by spouses, divorce, children in `latch-key' situations, juvenile crime and drug addiction, it is most inconsistent for that Government to lessen in any way the support that Australian families need to help them to survive. Your petitioners therefore humbly pray that the Senate in Parliament assembled should: 1. reject any proposed cuts to the support now provided to families by way of family allowance; 2. reject any proposal to introduce a `flat-rate' family allowance, but rather keep family allowance fully proportional to family size; and 3. reject any proposal to abolish or diminish the dependent spouse tax rebate. And your petitioners as in duty bound will ever pray. by Senator Parer (from 412 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 A.C.T. Smoking and Tobacco Products Advertisements Prohibition Bill'' introduced by Senator Evans, because it represents the first positive national step towards the eventual elimination of wide-spread serious ill health caused by smoking tobacco. by Senator Vigor (from 120 citizens). To the Honourable the President and the members of the Senate in the Parliament assembled. The petition of the undersigned respectfully showeth: That certain Trade Unions are currently forcing employers and employees to join union-controlled Superannuation schemes through industrial blackmail, thereby extending the Unions' economic power and at the same time infringing individual rights. Your petitioners therefore humbly pray that the Government: (i) Guarantee that Occupational Superannuation is a matter of individual choice. (ii) Declare illegal industrial standover tactics which force people to join superannuation schemes controlled by, or sponsored by, trade unions. (iii) Protect those companies and their employees who establish their own superannuation arrangements at the enterprise level. (iv) Ensure that union or industry-based schemes are not disguised pay rises by providing that employees must also make contributions. (v) Provide that control of the funds of such schemes is vested in the elected representative of the contributors to those schemes. (vi) Oppose any backdoor attempts at achieving compulsory unionism. And your petitioners as in duty bound will every pray. by Senator MacGibbon (from nine citizens). To the Honourable the President and members of the Senate in Parliament assembled, the petition of the undersigned shows that the Hawke Government should: Pass on the full benefit of lower international oil prices on 1 March 1986; Not increase or extend fuel taxes; and Maintain its tax cut commitments Your petitioners humbly pray that the Hawke Government honour its commitment to the Import Parity Pricing Policy. And your petitioners as in duty bound will ever pray. by Senator MacGibbon (from 48 citizens). To the Honourable the President and members of the Senate in Parliament House assembled. We, the undersigned citizens of Australia, humbly pray that the Parliament act to outlaw the practice of the large petrol companies also controlling petrol retail outlets in competition with independent petrol distributors and retailers who they supply, thus acting in a position of unfair competition, and leading to the large companies exerting unconscionable pressure on those independent distributors and retailers. And your petitioners, as in duty bound, will ever pray. by Senator Vigor (from 94 citizens). Petitions received. Senator CHANEY(Western Australia-Leader of the Opposition) —I give notice that, contingent upon a Minister moving a motion that a Bill be considered an urgent Bill, I shall move: That so much of Standing Order 407B be suspended as would prevent debate taking place on the motion. Notice of Motion Senator CHANEY(Western Australia-Leader of the Opposition) —I give notice that, contingent upon a Minister moving a motion to specify time to be allotted to the consideration of a Bill, or any stage of a Bill, I shall move: That so much of Standing Order 407B be suspended as would prevent the motion being debated without limitation of time and each Senator speaking for the time allocated by Sessional Orders. Notice of Motion Senator CHANEY(Western Australia-Leader of the Opposition) —I give notice that, contingent upon the Chair declaring that the time allotted for the consideration of a Bill, or any stage of a Bill, has expired, I shall move: That so much of Standing Order 407B be suspended as would prevent further consideration of the Bill, or the stage of the Bill, without limitation of time or for a specified time. Notice of Motion Senator CHANEY(Western Australia-Leader of the Opposition) —I give notice that, contingent upon the Chair declaring that the time allotted for the consideration of a Bill, or any stage of a Bill, has expired, I shall move: That so much of Standing Order 407B be suspended as would prevent the questions being put in respect of any amendments circulated by the Opposition or the Australian Democrats, and that such questions be put accordingly. Senator Sir JOHN CARRICK(New South Wales) —I give notice that, on the next day of sitting, I shall move: That the Senate- (a) conscious of the need for significant progress to be made in the Mutual and Balanced Force Reduction (MBFR) Negotiations between NATO and the Warsaw Pact; and (b) conscious, too, of the substantial numerical superiority and close concentration of the Warsaw Pact groundforces by contrast with the wide global dispersal of NATO troops; (c) actively supports the new Western initiatives which include: (i) achieving a reduction of 5000 United States and 11,500 Soviet ground troops in units; the length of the reduction period, to be agreed, not to exceed one year, (ii) a collective no-increase commitment on NATO-Warsaw Pact and US-Soviet ground and air forces remaining in the MBFR zone, to begin when reductions are complete and to last for 3 years, and (iii) a package of verification measures including yearly exchange of detailed information of units down to battalion level, 30 annual on-site inspections to monitor compliance and permanent entry-exit points to monitor troop movements in and out of the zone of reductions; and (d) calls upon the Hawke Government to use its good offices in assisting the achievement of these objectives. Senator BOSWELL(Queensland) —I give notice that, on the next day of sitting, I shall move: That the Senate- (a) condemns the continued attack on the Queensland economy by the Minister for Finance (Senator Walsh) at Question Time; (b) calls on Senator Walsh to concentrate on the Federal economy, which is in dire straits and running out of control with the balance of payments deficit expected to reach $14 billion by 30 June 1986 and the domestic economy in a state of depression; (c) notes that the economic indicators Senator Walsh uses to base his attack on Queensland, such as jobs advertised in local newspapers, are in no way able to set a true assessment of the Queensland economy; (d) recognising the figures put out by the Australian Bureau of Statistics (ABS) as a true basis for economic research; (i) notes that the ABS figures indicate that Queensland employment grew in the 12 months ended April 1986 by 72,600 jobs or 7.1 per cent, the highest of any State and well above the national average of 5.4 per cent, and (ii) notes that the ABS figures for the period ended April 1986 show the decrease in unemployment in Queensland has been 4.8 per cent, representing the fastest decrease in unemployment of any State, and is well above the 0.5 per cent achieved nationally; (e) congratulates the Queensland Government on creating 20 per cent of all jobs in Australia with 16 per cent of the population; (f) notes that the Queensland economy is steady and reliable in contrast to the Federal economy which is fast becoming one of a banana republic, in the words of the Treasurer, (Mr Keating); and (g) notes the statement by the ABS that there are more people looking for work in Queensland due to high interest rates, the proposed fringe benefits tax and low commodity prices which have led to rural producers' wives and children to seek work off the farm. Senator VALLENTINE(Western Australia) —I give notice that, on the next day of sitting, I shall move: That the Senate- (a) recognises the impatience of the world's people waiting for a much needed breakthrough on a Comprehensive Test Ban (CTB) treaty relating to nuclear weapons; (b) notes that in the 1985 report from the Conference on Disarmament to be tabled by the Minister for Foreign Affairs (Mr Hayden) on 3 June 1986, the `United States was opposed to any mandate calling for negotiation of a treaty; it regarded a CTB as a long-term objective and not something which should be negotiated at the present time'; (c) welcomes the extension of the Soviet moratorium on nuclear testing until 6 August in the wake of the Chernobyl nuclear accident; (d) considers that the next 2 months are therefore crucial in applying pressure on our ally seriously to work on negotiation of a CTB, but that more pressure is needed than words, which apparently fall on deaf ears; (e) suggests 2 possible actions which the Australian Government could take to demonstrate its `top priority in the disarmament field' as stated by the Minister for Resources and Energy (Senator Evans) on 8 April 1986: (i) that the Australian Government delay renewal of the Pine Gap lease pending significant United States action towards a CTB, and (ii) that the Australian Government declare a moratorium on the visits of United States warships until there is significant US action towards a CTB. Senator REID(Australian Capital Territory) —I give notice that, on the next day of sitting, I shall move: That the Senate- (a) notes the comments made by the Australian Capital Territory youth workers who have described the Federal Government's traineeship and Priority One Program as `an unsatisfactory band-aid program'; and (b) calls upon the Government to alter its economic policy so that young people can look forward to genuine long-term employment and careers, rather than more of the self-promotional and highly inadequate programs which presently pass for youth employment schemes. Senator COONEY(Victoria) —Pursuant to my notice of intention given yesterday, I now withdraw Business of the Senate, Notice of Motion No. 1 standing in my name for this day of sitting for the disallowance of the Northern Prawn Fishery Management Plan (No. 3). Senator COONEY(Victoria) —Pursuant to my notice of intention given yesterday, I now withdraw Business of the Senate, Notices of Motion Nos 1 and 3 standing in my name for five sitting days hence, for the disallowance of the Extradition (Finland) Regulations (Amendment) and the Rates (Amendment) Ordinance 1986. Senator CHANEY(Western Australia-Leader of the Opposition) —by leave-I gave notice of four motions a few minutes ago. Senator Harradine has drawn my attention to the fact that he would like to be included as being able to move amendments pursuant to the motion. To save Senator Vallentine and Senator Harradine moving separate motions, I amend the fourth notice of motion by inserting reference to Senator Harradine and Senator Vallentine in the penultimate line of that notice of motion, so that it would read: That so much of Standing Order 407b be suspended as would prevent the questions being put in respect of any amendments circulated by the Opposition, the Australian Democrats, Senator Harradine or Senator Vallentine, and that such questions be put accordingly. The PRESIDENT —On 9 April 1986 I made a statement to the Senate concerning the judgment given in the Supreme Court of New South Wales relating to Article 9 of the Bill of Rights in its application to the Houses of the Australian Parliament. In the debate that followed, it was suggested that it would be necessary for the Parliament to legislate to avoid the unacceptable consequences of that judgment and to restore the established interpretation of Article 9. It was further suggested that I, as President of the Senate, take some action to initiate the necessary legislation. It was also put to me that any legislation should deal with the changes in the law recommended by the Joint Select Committee on Parliamentary Privilege in its report in 1984, so that the Senate could consider those recommendations in conjunction with any proposed provisions dealing with the interpretation of Article 9. These suggestions were reinforced by requests made to me by senators in discussion. In response to those requests I have now had a Bill prepared by one of the Senate Department's consultant draftsmen to carry out these two purposes. I have decided to table the Bill in draft form so as to allow senators and members time to make comments on the proposed provisions. It is my intention to consider such comments and to introduce the Bill in the next period of sittings. I therefore present to the Senate a draft Bill, together with an explanatory memorandum explaining its provisions. In order to assist honourable senators in their consideration of relevant matters I also present to the Senate a commentary prepared in the Senate Department on the judgment of His Honour Mr Justice Hunt. Copies of these documents will be circulated to honourable senators. Following my statement to the Senate on 9 April I presented the text of that judgment and the submissions which were made to the Supreme Court of New South Wales on my instructions. It is an unprecedented step for a Presiding Officer to initiate legislation, but I have taken this step because of the fundamental importance to both Houses of the matters involved. On all the advice given to me the judgments given in the court represent a serious threat to the freedom of speech in parliament and to the capacity of members to speak fearlessly for their constituents and an equally serious threat to the protection of witnesses who give evidence to parliamentary committees. In taking this action to initiate legislation I have the support of Madam Speaker, who has examined the draft Bill and approved of it in principle, and she will be presenting it to the House of Representatives later today. Clause 16 of the draft Bill deals with the interpretation of Article 9 and the remaining clauses deal with the recommendations of the Joint Committee. The Bill departs from these recommendations in a number of respects, and these departures and the reasons for them are explained in the explanatory memorandum. I strongly recommend to honourable senators that they become acquainted with the issues involved in this matter and read the documents which I have presented, so that early consideration may be given to the proposed legislation. I look forward to receiving any comments from senators or members on the draft Bill. Senator GARETH EVANS(Victoria-Minister for Resources and Energy)(10.15) —by leave-I move: That the Senate take note of the statement and papers. In doing so, Mr President, I congratulate you on the initiative you have taken to bring this matter forward in this way. I endorse your sentiment that all honourable senators should address themselves very carefully to the issues raised by this draft legislation, not only insofar as it reflects the report of the Joint Select Committee on Parliamentary Privilege but also insofar as it deals with-in a way that may not be completely uncontroversial-the judgment of Mr Justice Hunt on the Article 9 question. Senator DURACK(Western Australia)(10.16) —On behalf of the Opposition I support the motion that has been moved by Senator Gareth Evans on behalf of the Government that the Senate take note of the statement and, of course, the material presented with the statement, namely, the draft Parliamentary Privileges Bill and also the very useful analysis of the judgment of Mr Justice Hunt which has been prepared for the further information and guidance of senators and members. Mr President, I appreciate that this is, as you call it, an unprecedented step for a Presiding Officer. I am interested and pleased that Madam Speaker has also agreed to table the document in the House of Representatives. It is a fact that a Bill has been introduced in the House of Representatives to give effect to the recommendations of the Joint Select Committee on Parliamentary Privilege, but the House does not seem to have made much progress in dealing with that very useful measure. Mr President, your Bill deals with two matters. Not only does it give effect to that recommendation of the Joint Select Committee, but also it addresses the added and probably more immediate problem of the position in which senators, members and witnesses appearing before Senate committees are placed as a result of the judgment of Mr Justice Hunt. It is sensible that the two matters be addressed in the one Bill. It is a very well drafted Bill, as one would expect having regard to the person who is the consultant to you on the drafting of this legislation. Clearly there are matters of controversy which need to be considered, but I do not think there is any controversy about the need for something to be done, particularly and immediately, to protect witnesses appearing before parliamentary committees. It is certainly the view of the Opposition that this matter should be considered during the recess so that we should be in a position early in the Budget session to come to grips with the problem and provide a solution to it. I hope that the initiative you have taken will be responded to not only by this chamber but by the Parliament as a whole. Senator CHIPP(Victoria-Leader of the Australian Democrats)(10.18) —Mr President, I pledge the support of the Australian Democrats for the motion that is before the Chair. I warmly commend you and Madam Speaker for the refreshing initiative you have taken in this matter. I say that with sincerity, yet with a little sadness, because I suspect that if Senator Missen had still been with us he might well have put a different view-a view with which I would have disagreed, but which I would have respected. My Party and I warmly applaud what you have done for several reasons. I have had the honour of serving on several committees of this Parliament and the added honour of serving on Senate committees, which I find has been a more rewarding experience than the joint committees or House of Representatives committees on which I have served. I refer to the Senate committee which inquired into what form the National Crime Authority should take and, indeed, the first Senate committee inquiring into the conduct of a judge. I was greatly impressed by the power and the ability of Senate select committees to do good. Let me give an example-a hypothetical example I hasten to add. Let us assume that in a certain State organised crime and corruption have reached massive proportions. Let us assume that in a State this corruption has infiltrated the magistracy, the judiciary, the Parliament, both State and local government, and indeed the police force. Let us assume that there is a group of honest policemen in this hypothetical example who want to rebel against corruption. Where else can those people turn other than to the Senate of the Parliament of Australia? It is their only refuge, their last refuge. In some cases it has been just that. On both the committees on which I served I can remember clearly witnesses coming forward who were literally putting their lives in danger by giving honest testimony because they were treading in an area of highly organised crime and corruption. Whether or not their evidence was totally accurate-I am sure it was truthful-it was given with great courage, conviction and sincerity. All those witnesses were advised beforehand, either by the chairman of the committee or by their legal advisers, that those proceedings were privileged. In other words, they believed that they would be doing an altruistic act in the knowledge that whatever they said could not be used by another form of inquisition or another court. As I understand it, Mr Justice Hunt's judgment has, with respect, changed that and I believe that this Parliament would be very remiss if it did not act with speed. You, Mr President, and Madam Speaker have acted with such speed and it would be a tragedy if the rest of us in this Senate allowed your quick initiative to go unheeded and did not pick up this question now and resolve it. If we do not, no witness in his right mind will give evidence before any Senate select committee or any parliamentary committee which could land him or her in trouble in the future. If that sort of fear is inculcated into the hearts and minds of witnesses, we may as well forget investigatory committees of this Senate or of this Parliament. If that happened it would be one of the great tragedies to befall the democratic process in this country. Senator HARRADINE(Tasmania)(10.23) —Mr President, I rise to support what has been said about the initiative that you have taken to table the draft Parliamentary Privileges Bill 1986. Very frequently this whole question of parliamentary privilege is misunderstood-both by the media and by some sections of the community. They believe that the question of parliamentary privilege implies some sort of privilege to members of parliament. In fact, the whole concept of parliamentary privilege is to protect the rights of the people to be represented in the chamber without fear or favour. It is indeed our privilege to do that. Of course this must be achieved with responsibility and balance but it also must be achieved with due regard to the rights of individuals outside this place to the protection of their honour and character. As a result of the judgment in the Supreme Court of New South Wales part of our representative function is under question. I refer particularly to the committee system of the Senate which, I believe, forms a very important part of our representative function because when Senate committees, and committees of the Parliament generally, deal with questions of major matters of public policy, with questions of government administration or with other questions of social concern, through that system, people within the community are able to come forward to make submissions and representations directly to the Parliament. If, because of this judgment, they are precluded from being totally forthcoming before those committees, our representative function will be somewhat diminished and, therefore, the rights of individuals in this community and the rights of parliament in a parliamentary democracy will be under attack. This is really an historic occasion, Mr President. I do not know of any previous case of a Presiding Officer undertaking a task such as you have undertaken, but you have grasped the importance of this question to the future of parliamentary democracy. I am sure that honourable senators and members of the House of Representatives will have regard to what you have said and study the documents that you have laid on the table. Question resolved in the affirmative. Senator RYAN(Australian Capital Territory-Minister for Education) —Papers are tabled 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. Report of the Australian delegation to the 1985 session of the Conference on Disarmament, Geneva, 5 February-30 August 1985-together with the text of a statement by the Minister for Foreign Affairs. 2. Meteorology Policy Committee-Annual report 1985. 3. Report on Fellowships awarded for 1986-National Research Fellowships Advisory Committee. 4. Commonwealth Teaching Service-Annual report 1985-pursuant to section 52 of the Commonwealth Teaching Service Act 1972. 5. Federal water assistance program-document relating to the provision of financial assistance to Western Australia for the Harding River Dam and the country towns water supply improvement program-pursuant to section 6 of the National Water Resources (Financial Assistance) Act 1978. 6. Energy 2000-`A National Energy Policy Review-an Overview'-discussion Paper No. 1 7. Energy 2000-`A National Energy Policy Review-Petroleum'-discussion Paper No. 2 8. Energy 2000-`A National Energy Policy Review-Electricity'-discussion Paper No. 3 9. Energy 2000-`A National Energy Policy Review-Coal'-discussion Paper No. 4 10. Energy 2000-`A National Energy Policy Review-Natural Gas'-discussion Paper No. 5 11. Energy 2000-`A National Energy Policy Review-Renewable Energy'-discussion Paper No. 6 12. Energy 2000-`A National Energy Policy Review-Synfuels'-discussion Paper No. 7 13. Energy 2000-`A National Energy Policy Review-Research and Development'-discussion Paper No. 8 14. Energy 2000-`A National Energy Policy Review-Energy Conservation'-discussion Paper No. 9 15. Energy 2000-`A National Energy Policy Review-Energy Demand Scenarios: 1985-2000'-discussion Paper No. 10 Motion (by Senator Gareth Evans) agreed to: That leave be given to introduce a Bill for an Act to make provision in relation to the non-proliferation of nuclear weapons and to establish, in accordance with certain international treaties and agreements to which Australia is a party, a system for the imposition and maintenance of nuclear safeguards in Australia, and for related matters. Bill presented by Senator Gareth Evans, and read a first time. Standing Orders suspended. Senator GARETH EVANS(Victoria-Minister for Resources and Energy)(10.27) —I move: That the Bill be now read a second time. Senator Chipp —Is this the same wording as my Bill? Senator GARETH EVANS —No. Senator Chipp —Nearly? Senator GARETH EVANS —No. This is on a different issue. This is the safeguards issue. The South Pacific nuclear free zone Bill-the Environment Protection (Sea Dumping) Amendment Bill 1986-is to come through the House of Representatives later in the day. I seek leave to have my second reading speech incorporated in Hansard. Leave granted. The speech read as follows- Honourable senators will recall that I foreshadowed the introduction of this Bill when I introduced legislation for the Australian Nuclear Science and Technology Organisation, or ANSTO, in November last year. The Bill will give legislative effect to those of Australia's international non-proliferation obligations which require domestic legislation and provide a legislative basis for the operations of the Australian Safeguards Office. In giving legislative effect to certain of Australia's international obligations, the Bill bears closely on Australia's international standing and the responsibilities of my colleague the Minister for Foreign Affairs, and I shall be administering the Bill in consultation with him. This Government has consistently pursued a firm policy of nuclear non-proliferation and of commitment to nuclear safeguards. This has been demonstrated by Australia's taking a leading role at the 1985 Nuclear Non-Proliferation Treaty Review Conference, our active participation in other international meetings dealing with non-proliferation and safeguards matters, support of the International Atomic Energy Agency, or IAEA, and our policy requiring stringent safeguards on uranium exports. Nuclear non-proliferation is concerned with the control of nuclear material, sensitive nuclear equipment and technology, such as enrichment and spent fuel reprocessing, and certain materials of use in the nuclear fuel cycle, such as heavy water and reactor grade graphite. Australia's commitment to non-proliferation has been enshrined in a number of international agreements. These are the Nuclear Non-Proliferation Treaty, or NPT, the IAEA statute, our Safeguards Agreement with the IAEA and Australia's bilateral nuclear safeguards agreements. The NPT is the major international Treaty concerned with non-proliferation and contains several interrelated undertakings. Essentially it is a three-way bargain among the 134 countries which are parties to the Treaty, in which those countries without nuclear weapons undertake not to acquire them and to accept safeguards; the nuclear weapon states agree to work towards nuclear disarmament; and the developed nations agree to help the less-developed ones obtain the benefits of nuclear energy. Australia became a party to the Treaty on 23 January 1973. In pursuance of its NPT obligations Australia signed a Safeguards Agreement with the IAEA on 10 July 1974 accepting IAEA safeguards on nuclear material in all nuclear activities carried out in Australia. Under this agreement all nuclear material within Australia is controlled and accounted for by the Australian Safeguards Office which reports to the IAEA. The IAEA, for its part, verifies the reports, including by regular inspections of nuclear material held in Australia. The system of safeguards operated by the IAEA and national safeguards bodies, such as the Australian Safeguards Office, is designed to provide assurance that international obligations accepted by states are being met and to detect and deter any non-compliance with those obligations. Safeguards measures include maintenance and verification of detailed nuclear accounting and record keeping, use of physical inspections, and containment and surveillance devices such as cameras and special seals, at nuclear installations. The Government permits exports of Australian uranium only to countries with which Australia has a bilateral nuclear safeguards agreement. These agreements provide a detailed set of safeguards arrangements designed to provide assurance that Australian origin nuclear material not only remains in the civil nuclear fuel cycle but that Australia can at all times account for it. This is achieved by ensuring that Australia's safeguards requirements apply to all transfers, processing and use of Australian uranium or derived material equivalent to the amount of uranium supplied by Australia. Currently Australia has concluded twelve nuclear safeguards agreements. Apart from the agreement with the IAEA, there are ten agreements with individual countries, and an agreement with the European Community's nuclear agency, Euratom. Several aspects of Australia's obligations under the IAEA Agreement and the bilateral agreements require domestic implementation through control of the possession, use and transport of nuclear material, nuclear equipment or nuclear technology. Until now Australia did not have domestic legislation to enforce all these obligations and has relied on the Customs Act and related regulations and co-operation from holders of nuclear items. This approach has been successful and there has never been the slightest suggestion from our bilateral partners nor from the IAEA that Australia has not complied with its nuclear safeguards obligations. However, I am sure no-one will disagree that this area is of such fundamental importance that our national safeguards system should be placed on the firmest legal footing without further delay. It should be noted that Australia's nuclear industry is quite limited in scope compared to other industrialised countries. We are, of course, a major producer of uranium but the processing of this uranium is limited to the production of yellowcake for the export market. The activities of the mining companies, in so far as they involve the possession and transport of uranium, will be covered by the proposed legislation. The Australian Atomic Energy Commission operates two research reactors and carries out nuclear research into the uses of radioisotopes and radiation. It also produces radioisotopes commercially. These activities will be continued by the Commission's successor the Australian Nuclear Science and Technology Organisation. Australian Government policy prohibits the development of further stages of the nuclear fuel cycle in Australia and, as I have stated in the second reading speech of the ANSTO Bill, future research and development activities by ANSTO will be directed towards the peaceful application of nuclear science and technology other than the development of the nuclear fuel cycle. Most of this research will not involve safeguardable equipment or technology. However any materials, equipment or technology that come under safeguards obligations will be strictly controlled and the present Bill is directed to this purpose. The uranium mining companies and the Australian Atomic Energy Commission will be the bodies chiefly affected by the proposed legislation. Elsewhere in Australia, use or possession of safeguardable nuclear material or technology is very limited. Radioisotopes in common use, for example, are not safeguardable and the legislation will not apply to them. However, depleted uranium which is in use in a variety of non-nuclear areas, such as shielding in radiography cameras, as counterweights in the controls of some aircraft or as ballast in technologically advanced yachts, does fall into the ambit of the Bill. The Australian Safeguards Office is currently examining how obligations relating to depleted uranium can be met with minimum inconvenience to those using this material. I take this opportunity to invite any bodies which have, or think they may have in their possession, any safeguardable nuclear material, equipment or technology, as defined in this legislation, to get in touch with the Australian Safeguards Office to see whether they might require a permit for that item. The Bill is divided into five parts. The first part contains the formal provisions of the Bill, including those relating to the constitutional basis for the Bill and the definitions. This part of the Bill also deals with commencement of the legislation-substantive provisions are to come into force by Proclamation. It is intended that, once the Bill is passed by Parliament, most of the provisions of the Bill will be brought into force as soon as the administrative procedures required to implement the legislation are put into place. However, Division 2 of Part III of the Bill, providing for the enforcement of the Convention on the Physical Protection of Nuclear Material, depends for its constitutional validity on Australia's ratification of the Convention, and it is intended therefore that this portion of the legislation will be brought into force contemporaneously with the ratification of that Convention. The main constitutional basis of the legislation is the external affairs power. However, several other areas of Commonwealth constitutional powers are also relevant and these are enume-rated in clause 8. I draw the attention of honourable Senators to the definitions clause of the Bill, especially the definitions of nuclear material, associated material, associated equipment and associated technology because those definitions circumscribe the items to which this legislation will apply. Nuclear material is defined to have the same meaning as in the Agreement between Australia and the IAEA. The Agreement defines nuclear material and provides for the application of safeguards to such material. The legislation, by adopting the same definition, provides for the domestic enforcement of Australia's obligations under that Agreement. The Agreement with the IAEA primarily applies to use of nuclear material, and does not provide expressly for the control of equipment, technology and material usable in nuclear applications. As examples, I might quote equipment for the enrichment of uranium, nuclear reactor technology and heavy water, which is a vital material for the operation of some types of nuclear reactors. However, these items are covered by Australia's bilateral agreements and export control understandings among nuclear suppliers and therefore are required to be controlled by this legislation. The definitions in the Bill ensure that the necessary items are brought within the coverage of the legislation. The key element in the scheme to control nuclear items within Australia is the requirement to have permits to possess and to transport nuclear items. These provisions are set out in Part II of the Bill. The permits are to be issued by the Minister while the administrative details are to be handled by the Director of the Australian Safeguards Office. The permits would be issued subject to conditions which would cover such matters as duration of the permit, the location in which the item may be kept, the uses to which the item may be put, the persons who may have access to the item, transport, transfer and disposal conditions and so on. The intention is that every aspect of the possession, use and transport of nuclear items should be strictly controlled. In addition to the permit requirements, special authorisation is required to communicate information, strictly defined as information primarily applicable to enrichment or reprocessing of nuclear material, production of heavy water or the making of nuclear weapons, being information that is not in the public arena. Part II of the Bill also includes a provision allowing the Minister to exempt certain nuclear material from the provisions of this legislation. Such an exemption may be made only where safeguards in relation to the nuclear material have been terminated or exempted in accordance with the IAEA Agreement. This could arise where, for example, the nuclear material has been transferred out of the country, has been consumed or diluted, is practically irrecoverable or is to be used in non-nuclear activities. Any exemptions under these provisions are to be tabled in Parliament and are therefore subject to the scrutiny of Parliament. Part III of the Bill creates offences. Division 1 sets out the offences related to the administration of the controls established by the legislation. These offences include the possession and transport of nuclear items without a permit, breach of a condition of a permit, unauthorised communication of sensitive information and action interfering with the proper exercise of the functions of inspectors and the Director of the Safeguards Office. Appropriate monetary penalties and terms of imprisonment are provided for these offences. Division 2 creates offences required to comply with our obligations under the Physical Protection Convention and to underscore the severity of such offences. Very substantial penalties are provided for these offences. As I mentioned earlier this portion of the Bill will be brought into force when Australia ratifies the Physical Protection Convention. Part IV of the Bill deals with administrative matters. A statutory position of Director of Safeguards is created by the Bill and the Australian Safeguards Office is established by statute. The Director is to be appointed by the Governor-General for a period of up to five years while the Director's staff are to be departmental officers. This arrangement will give the Director the desired amount of independence without incurring the expense of a statutory authority. The functions of the Director will be essentially twofold. On the one hand the Director will be responsible for ensuring the effective operation of the system of accounting for and control of nuclear material and items within Australia as required by the IAEA Agreement and our bilateral safeguards agreements. On the other hand he or she will be responsible for keeping account of Australian origin uranium in other countries and monitoring the compliance of our treaty partners with the terms of the bilateral agreements. These functions have been carried out to date by the Australian Safeguards Office without legislative backing and a highly efficient and effective accounting system has been established. I would like to say, at this stage, a word of praise for the Australian Safeguards Office which has been carrying out its job most satisfactorily and, I am certain, will continue to do so under this legislation. In addition to these primary functions the Director will have the functions of providing advice to the Minister on safeguards matters and providing a technical input into policy formulation by the relevant Departments. The Director will also be responsible for carrying out and co-ordinating research related to nuclear safeguards. Australia is a very strong supporter of the IAEA and, in addition to its mandatory contribution to the Agency, provides voluntary financial assistance, part of which is for the continued search by the Agency to improve safeguards. This assistance usually takes the form of research done in Australia or the provision of experts to the Agency in Vienna at no cost to the Agency. The technical aspects of such assistance are carried out and will continue to be carried out by the Australian Safeguards Office in conjunction with the Australian Atomic Energy Commission and its successor the Australian Nuclear Science and Technology Organisation. The Director will be assisted by inspectors whose functions will be to carry out inspections as required to ensure compliance with the provisions of the legislation and permit conditions. The inspectors will have rights of entry with the consent of an occupier of relevant premises, in accordance with an agreement or in pursuance of a warrant. They will also have the right of seizure of nuclear items in certain circumstances. The Bill also outlines the functions of IAEA inspectors. Under the agreement with the IAEA Australia is under an obligation to allow inspection of all nuclear material subject to safeguards under the Agreement. These inspections are carried out by IAEA inspectors who visit Australia regularly for that purpose. The IAEA inspectors are accompanied by Australian Safeguards Office inspectors on all their inspection visits and entry to nuclear establishments is arranged by the Safeguards Office. The legislation will provide the Safeguards Office with the necessary powers to ensure that Australia is able to comply with its obligations to the IAEA in respect of entry by IAEA inspectors. Part V of the Bill contains miscellaneous provisions. Attention is drawn to clause 71 which provides that any powers or functions under the legislation are to be exercised in accordance with relevant international agreements. The international agreements which this Bill is intended to implement spell out in some detail Australia's international obligations. Some of these obligations require domestic law for their implementation. The scheme adopted by this Bill is not to attempt to spell out these obligations but to confer fairly general powers on the Minister and the Director which would allow them to enforce Australia's obligations in so far as they require enforcement by domestic law. Clause 71 is designed to ensure that the Minister and the Director act in accordance with Australia's international obligations in carrying out their duties. I commend the Bill to the Senate. Senator GARETH EVANS —I also table the explanatory memorandum for the Nuclear Non-Proliferation (Safeguards) Bill 1986. The PRESIDENT —Order! Pursuant to the order of the Senate on 14 April 1986, the resumption of the debate shall be an order of the day for the first day of sitting in August 1986. Consideration resumed from 3 June. FRINGE BENEFITS TAX ASSESSMENT BILL 1986 Proposed new clause 57b (Provision of benefits to employers of scientific, charitable or public educational institutions to be exempt). Senator TEAGUE(South Australia)(10.30) —We have been debating over several days the Fringe Benefits Tax Assessment Bill which the Hawke Labor Government has introduced. Amongst the many aspects of this legislation that the Opposition is objecting to is the proposal that is now before us in the Committee stage-that those few bodies exempted from the legislation's effects should not include the employees of scientific or public educational institutions. It is the view of the Opposition that these bodies, which should not be subject to tax, are non-profit, public beneficial organisations. Although Senator Haines has already brought into this debate a definition from the Elizabethan era of charitable organisations which, in its quaint words includes schools amongst beneficial or charitable organisations, the amendment which the Opposition and the Australian Democrats have already gained with respect to those charitable organisations which are assisting what the public understands as charities does not include educational bodies. I think it is beyond belief that the Hawke Government wants to impose additional costs on public education institutions in this country, whether they be secondary schools or tertiary education institutions. I raise a couple of instances. The Australian Parents Council, for example, which is a federation of parent groups in all States of Australia which includes parents and friends associations connected with non-government schools, has written to senators saying that its legal advice is that the Bill will require non-government schools to pay a fringe benefits tax in respect of the value of money involved where teachers attend various dinners that may be provided at functions held by non-government schools. Let me quote from the letter I have received: Examples of school functions at which suppers and other meals are served and at which teachers must be present are: parent/teacher nights, concerts, prize givings, committee meetings, end of year activities, excursions, fetes and other well-known and accepted school activities designed to provide better education for children. Whilst section 54 of the Act gives exemption to the consumption of small amounts of food in some company premises it specifically does not include in that exemption food or drink that is provided, other than in very limited circumstances and in limited amounts. In our view this Bill means that, where teachers are required to attend such functions, those non-government schools will be required to pay a fringe benefits tax to the Australian Government. We do not believe that this is right. We believe that it is rightly being resisted by parents and friends associations all around Australia. More importantly, boarding schools will also be taxed for the provision of accommodation to live-in teachers and supervisors. This will create additional burdens on public education institutions and non-government institutions and will divert scarce resources from the teaching of children. It is partly with this in mind that we have moved that there be a general exemption from the fringe benefits tax for all employees in such educational institutions. The same case can be made for the employees of scientific institutions. I raise a second example in the tertiary education area. For more than 50 years all universities in Australia have had associated residential colleges. These residential colleges have separate foundations. Some are religious and some are not religious. The students live in and gain tutorials in an educational environment. They then attend courses at universities. These days students of colleges of advanced education, institutes of technology and some technical education and further education students also live in these residential colleges. At the end of this year the rather small direct subsidy to these tertiary colleges, the Commonwealth benefit, will be stopped. In addition to the stopping of the decades long Commonwealth subsidy to these tertiary education colleges there will be the penalty of their being required to pay a fringe benefits tax. I instance the case of one university college in the city of Adelaide. Because the college is a non-profit body-it is a public educational institution-it is exempt from all tax. No tax is now paid by that college. It seems particularly anomalous that, for the first time, it has become liable as an educational institution to any kind of tax. The tax arises because of the failure of the Bill to exempt the tutorial staff of the college who are resident at the college and who give direct supervision to the students who are resident in the college. It will be taxed 49c in the dollar on the value of the accommodation provided. The Bill says that this is to be the market value, but there is no market in this matter. The public at large cannot go there as if to an hotel or a boarding house and live in a room which is integrated in a corridor with the students resident in that college who attend universities and colleges of advanced education. There is not a market. It is an essential function of the university college for the staff to live in. I use this college as an example. There are 140 male and female students, 96 per cent of whom come from homes which are in the country, interstate or overseas. Only 4 per cent of the students are from the metropolitan area. An additional cost of $15,000 for that college alone will have to be paid in fringe benefits tax. This amounts to $3.57 per week for each of the 140 students who are resident at the college. It is widely known that tertiary students are under a great deal of cost pressure to be able to stay at university or college. Even if they have a tertiary education allowance or very generous parents, they will still have to go without a great number of purchases and activities which would be regarded as normal at any other stage of life. In order to meet the fringe benefits tax these impecunious tertiary students would be forced to pay an additional $3.50 a week to stay in the college. Where else would the college get its money? The Commonwealth benefit will finish at the end of this year. This is a direct barrier being placed by the Government on the otherwise reasonable access that students from rural areas have to tertiary studies. For all the rhetoric surrounding this legislation regarding the chasing of non-cash income of rather wealthy Australians-for example, the fringe benefits tax on car allowances and so on that was spoken of in earlier debate on this legislation in the Senate-does the Government deliberately want to impose that penalty on tertiary students in Australia? It is the view of the chairman of the finance committee of the college whose example I was citing that these two additional charge elements, that is, the cessation of the Commonwealth benefit and the penalty of this fringe benefits tax, will force access to this college out of the reach of many of its present students-especially those of low to moderate means. It would be a great pity if residential colleges became the preserve of a socio-economic elite. I have put very clearly to the Government our reasons for moving this specific amendment to the legislation. Although we are opposed to the whole legislation-and it appears to have the numbers to be passed in the Senate because the Australian Democrats are supporting the Government on this legislation in general-I ask whether at least the Government can consider our argument that the fringe benefits tax not be levied on public educational and scientific institutions. Even at this stage we urge the Australian Democrats and Government senators to support us in this amendment. Senator HAINES(South Australia)(10.43) —The Australian Democrats will not support the Opposition's amendment to exempt scientific organisations and educational institutions from the fringe benefits tax. I must say that I am rather astounded by the somewhat sanctimonious rhetoric used by Senator Teague to defend the residential colleges from fringe benefits tax because of the impact of $3-odd on their students when he is a member of a party that has talked for years about charging students tertiary fees-something which would cost them far more than $3-odd a week extra and something that would deny far more students access to tertiary institutions. Senator Peter Baume —That is an absolutely untruthful statement. Senator HAINES —The honourable senator is one of those who brought forward tertiary fees as an issue. That is on record. Do not talk to me about the likely damage that a fringe benefits tax will have on some students because it might increase their residential charges by something like $3 a week. I have every sympathy for them but I also have every sympathy for students who at the moment are very concerned that a Liberal government might get back into power and who might find, as a consequence, that their tertiary courses are cut very short because of the likely proposal to introduce fees. I can remember the days when fees were charged at universities. It was not much fun for those people from the country or for those people who could not afford the fees. As far as the general fringe benefits tax on schools and so on is concerned, the Opposition is picking up some kind of populist issue among the wealthy private schools, and that is as far as it is going. I have had no approaches at all from Catholic schools on this issue, although I have had approaches from other people on other issues with regard to the fringe benefits tax. If the Catholic schools generally were concerned about the impact of the fringe benefits tax on them, I am sure that knowing their lobbying potential they would have done something about it. The fact is that these taxes are far more likely to affect the Timbertops of this world than they are to affect the little local Catholic primary school which has a few students who pay very limited fees. The fact that schools such as Timbertop are classified as non-profit-making organisations for the purpose of paying income tax is no grounds at all for exempting them from a fringe benefits tax on the perks that they are in the position to give to some of their staff-certainly not all of their staff-because of the extraordinary fees which they charge. If those schools are feeling a little troubled by paying the tax, they can either stop providing the fringe benefits or they can use the money which they get in to cover the tax instead of pouring it back into the sorts of benefits, some of which are rather esoteric, that they provide to the privileged students who attend those schools. I understand that the impact on live-in teachers, those house masters and house mistresses who presumably are on call 24 hours a day, will be limited partly because those who are on call 24 hours a day get a special benefit, and partly because the Australian Taxation Office, I understand, quite rightly defines living in a school environment as somewhat less than salubrious and will be judging the market rental accordingly. There is no reason for exempting these sorts of schools from paying the fringe benefits tax. The money which they get from the fees that they charge is quite sufficient. I am aware of that from having had my two children at a private school for something like 10 years. While I certainly appreciate the benefits that private and very wealthy schools provide to their students, I do not see any reason at all for them being exempted from this sort of tax in the same way that charitable organisations, for example, were last night. Senator WALSH(Western Australia-Minister for Finance)(10.48) —The Government will oppose this amendment for the basic reason which has been stated many times, that a fringe benefit is something of value to the employee and, therefore, it should be taxed somewhere or other. The value of equivalent benefits received by employees of different employers is not diminished by the fact that one of those employers is a scientific or public benevolent institution. While the Government, in the interest of getting the Bill passed, conceded the earlierextension moved by Senator Siddons, I think, it will not concede this one because it would provide a vast potential increase in the scope for exemptions which could be claimed by employees of organisations. In response to the sanctimony which we heard from Senator Teague, one thing that would not have occurred to him is that it would probably be a simple matter for trade unions to call all their paid employees education officers. They could be given a free house and a free car and escape the tax. That is something which would not have occurred to the Liberals because their ideological blinkers are such that they would not foresee the extension of this sort of loophole and potential rort to people whom they do not want to receive it because they can concentrate only on those whom they do want to receive it. Question put: That the words proposed to be inserted (Senator Peter Baume's amendment) be inserted. The Committee divided. (The Chairman-Senator D. J. Hamer) Ayes . . . . . . . . . . . 29 Noes . . . . . . . . . . . 35 —— Majority . . . . . . . . . 6 —— Alston, R. K. R. Knowles, S. C. Archer, B. R. Lewis, A. W. R. Baume, Peter MacGibbon, D. J. Bjelke-Petersen, F. I. Messner, A. J. Boswell, R. L. D. Newman, J. M. Brownhill, D. G. C. Parer, W. R. Carrick, Sir John Puplick, C. J. G. Chaney, F. M. Reid, M. E. (Teller)Collard, S. J. Sheil, G. Crichton-Browne, N. A. Teague, B. C. Durack, P. D. Townley, M. Guilfoyle, Dame Margaret Walters, M. S. Hamer, D. J. Watson, J. O. W. Harradine, B. Withers, R. G. Hill, R. Aulich, T. McKiernan, J. P. Black, J. R. Macklin, M. J. Bolkus, N. Maguire, J. R. Childs, B. K. Mason, C. V. J. Chipp, D. L. Morris, J. Coates, J. Ray, RobertCook, P. F. S. Reynolds, M. Cooney, B. Richardson, G. F. Crowley, R. A. Robertson, E. A. (Teller)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. Vigor, D. B. Haines, J. Walsh, P. A. Jones, G. N. Zakharov, A. O. McIntosh, G. D. Baume, Michael Coleman, R. N. Kilgariff, B. F. Grimes, D. J. Short, J. R. Colston, M. A. Jessop, D. S. Button, J. N. Vanstone, A. E. McClelland, Douglas Question so resolved in the negative. Clauses 58 to 142-by leave-taken together. Senator BROWNHILL(New South Wales)(10.56) —I want to ask a question in respect of clause 66. Will the Minister for Finance (Senator Walsh) advise the Committee of the way in which the additional holiday pay loading of 17.5 per cent and workers compensation, which are both compulsory, will be treated under the fringe benefits legislation? Senator MESSNER(South Australia)(10.57) —While the Minister is addressing the question put by Senator Brownhill, I would like to address myself to clause 67. This legislation is supposed to be simple so that people can understand it. A tax is to be raised against the employer rather than the employee who is his beneficiary because of the existence of the phenomenon of the so-called fringe benefit. Clause 67 deals with the way in which the avoidance of the fringe benefits tax can be combated by the Government. Sub-clause (2) is of real interest because it seems to me that one of the Government's fundamental objectives with this tax may well be frustrated by this sub-clause. As we heard during the debate at both the second reading stage and this stage, it is the obvious intention of the Government to force employers to give up the practice of giving fringe benefits to their employees and, rather, to cash up the payments which would then become taxable in the hands of the employees. We pointed out to the Government in debate earlier this week that this will have an impact insofar as there will be a definite tax incentive for employers to move to cash up the benefits for low income earners. This will not be the case in respect of high income earners. The Government's action will result in low income earners, who, of course, are the most numerous, paying the tax imposed on that cashed up benefit. Those at the higher end of the income scale, whom the Government is supposed to be chasing, will not have their benefits cashed up because in fact there will be a positive disincentive for employers to do so. As I have pointed out previously, there is no tax advantage in doing so; in fact, there is a tax disadvantage to the employer company to do so. So the low income earners will suffer the increased tax as a result of cashing up the benefit. That may well be the Government's intention. As I said, clause 67 (2) seeks to wipe out the avoidance of taxation. The clause more or less defines-and here I am paraphrasing-a tax benefit as being a taxable amount not included as a fringe benefit which could reasonably be expected to have been so included but for the arrangement. In other words, it appears to me that the clause could apply where an employer had rearranged a package of fringe benefits available to an employee to increase the cash salary component and thereby reduce the fringe benefit component. It appears to me that there is a catch-22 situation in regard to this clause. On the one hand the Government is saying that it wants employers to cash up the benefit, to pay out the benefit in cash to employees rather than provide fringe benefits. However, if one reads the anti-avoidance clause of the Bill-clause 67 (2)-one can see that the action that the employer takes to cash up the benefit is in itself a rearrangement which would be caught as an avoidance device by the very clause of this Bill which aims to stamp out avoidance. So the Government is being hoist with its own petard. The stated purpose of the legislation is being frustrated by this clause. It seems to me that clause 67 could have other ramifications. Whereas the equivalent anti-avoidance sections of the Income Tax Assessment Act-particularly Part IVa of that Act-make exception in regard to income, no exception is made in this piece of fringe benefits legislation for ordinary family or business dealings. Therefore, the fringe benefits tax legislation is certainly a more draconian approach in terms of the ordinary business dealings that are carried on among family members. Therefore, this le-gislation will obviously have a greater impact than Part IVa of the Income Tax Assessment Act. It seems to me that it would be unfortunate if the clause were construed in such a way as to impose a higher anti-avoidance requirement than do other parts of the tax law, especially that relating to income under Part IVa of the Income Tax Assessment Act. I really do not understand why the Government sees the need to do that in the case of this fringe benefits tax but does not see that need in respect of the ordinary income tax law. It seems to me that clause 67 would catch the innocent employer who, in the knowledge that the fringe benefits tax was to be introduced, simply sought to reorganise his employees' wages and packages to exclude non-cash benefits. That employer might increase the cash component of, for example, a company director who might be repaying a company loan. The employer might have made the arrangements following the announcement of introduction of this legislation which, of course, was made only recently but which we have had knowledge of since 19 September last year. I am trying to make the point that there is an element of retrospectivity in respect of this anti-avoidance clause. Take the case of a family company or family business which, prior to 19 September last year, gave a loan to its employee directors. Those loans would become subject to fringe benefits tax after 19 September because concessional rates of interest would apply. Senator Walsh —It is a continuing benefit. Senator MESSNER —Hold on. After that date, by the application of the anti-avoidance clause, clause 67, the directors, having repaid that loan during the period since September last year, would now find that that would be overridden by clause 67 because it would have had an anti-avoidance purpose; that is, to reduce the impact of the fringe benefits tax. If that is so, the legislation is retrospective, in the sense that no notice was given of that impact in the announcement by the Treasurer (Mr Keating) on 19 September 1985. Those three elements together lead us to have great concern about the impact of this particular anti-avoidance clause, clause 67, as it appears to go far further than the income tax law generally and certainly goes further than Part IVa of the Income Tax Assessment Act. To return to the first point, it seems to me that the silliest part of the whole proposal in clause 67 is that it appears to frustrate the Government's own intention. That intention has been stated to be that it wants to encourage employers to cash up the benefits for employees-that is, pay out the benefits in cash-rather than to provide them in kind. If that is the Government's intention, it appears to me that that will be frustrated by clause 67. Senator BJELKE-PETERSEN(Queensland)(11.07) —I want to ask the Minister for Finance one question regarding clause 59 and the supply of power to stations. How does the Minister determine the fringe benefit applicable to an employee of the power supplied where the station's lighting plant also supplies the workshop? Is this a fringe benefit on power supplied in that way? If it is, it would seem to me that this is really a discrimination against the rural sector for providing minimal facilities. Senator WALSH(Western Australia-Minister for Finance)(11.08) —Senator Brownhill asked me about holiday pay loading and workers compensation. The fact is that holiday pay and workers compensation are already taxable as income. I thought that would have been known fairly widely, but apparently it is not. Therefore, it has no relevance to this. Senator Messner made a string of assertions which are not correct. He can go on asserting anything, just as that self-serving charlatan, David Barnett, asserts in the Bulletin today that people using company cars will be required to keep log books and farmers also will have to record each trip. There is nothing much the Government can do, short of the laws of libel. Just a simple misstatement of fact is not grounds for an action for libel to stop charlatans such as Barnett printing that sort of rubbish, any more than we can stop people such as Senator Messner asserting in the Committee what is wrong; although at least there is a qualitative difference between the straight-out lies Barnett is writing and the possible genuine misunderstandings or misinterpretations from which Senator Messner suffers. I add in respect of this creature Barnett that when he was Malcolm Fraser's Press secretary he was on a salary, updated into present dollars, of about $38,000 a year and in one year he picked up $63,000 in overtime payments because he rorted the overtime. He stuck his snout so far into the public trough that the system had to be changed to put all ministerial staffers on a fixed overtime allowance because Barnett had fraudulently claimed-except the fraud was not provable-an overtime allowance which was about 165 per cent of his salary. This is the sort of odious creep who is going in to bat in the Bulletin to defend the rorts of which he and his odious contemporaries are beneficiaries. Senator Walters —I raise a point of order. I challenge the Minister to stop using coward's castle and to make his accusations outside the House. The CHAIRMAN —Order! There is no point of order. Senator WALSH —Senator Bjelke-Petersen asked how the electricity supplied to rural workers would be valued when it was generated on a property. I am advised that the Australian Taxation Office accepts the reasonable estimate by the employer based on broader costs of generation and in those situations the 40 per cent remote area concession would almost certainly apply. Senator BROWNHILL(New South Wales)(11.11) —The question regarding workers compensation was in regard to the premium that is paid by the employer which then becomes a protection for the employee. That amount of money is not taxed because the employer definitely gets a tax deduction for the insurance premium. Senator Walsh —Premium on what? Senator BROWNHILL —Workers com- pensation. Senator WALSH(Western Australia-Minister for Finance)(11.11) —I am advised that the answer is no; that the premium on the workers compensation insurance would have no relevance to this legislation, but of course it is deductible from normal income tax liability. Senator MESSNER(South Australia)(11.12) —It is more out of sorrow than anger that I rise to answer the points made by the Minister for Finance (Senator Walsh) in response to my remarks. He seemed to wipe aside the points I had made without any attempt to answer them. While he may regard me as being misguided, I would appreciate hearing from him in what way I am misguided so that I can get a better understanding, as can the taxpayers of the country, as to what is intended. Senator WALSH(Western Australia-Minister for Finance)(11.13) —I suppose Senator Messner has seen the explanatory memorandum. I confess that I have not turned my mind to this question before, but I am advised that page 91 of the explanatory memorandum covers the point Senator Messner has made. It states: It should be noted that . . . clause 67 would not apply merely by virtue of a benefit being terminated (e.g., `cashed-out') or a different benefit (i.e., an alternative benefit or a diminished benefit) being provided. Senator MESSNER(South Australia)(11.14) —Can we assume, on that last point I made, that the Commissioner of Taxation will interpret the law as it is in the explanatory memorandum and that past payments or payments in the repayment of a loan in order to avoid the effect of the fringe benefits tax would not be classified as an avoidance device? Is that the interpretation of the Commissioner of Taxation and the Minister; and the intention of the legislation? Senator Walsh —That is my advice, conveyed from the Commissioner. Senator MESSNER —That answers, hopefully, the retrospective aspect of the question. The other point on which I would like to have the Minister's comment is the earlier point about the cashing out of benefits. As the Minister might appreciate, at present many employers are very concerned about their options in the area of rearranging their employee packages. One of the options that is being put forward by many organisations, such as the Confederation of Australian Industry, is that employers ought to be encouraged to cash out the benefits. I understand that it is the Government's intention to seek to encourage people to do so. Senator Walsh —Preference. Senator MESSNER —That is the Government's preference. But the point is that if they do that, will they be caught under clause 67 in that, if they cash out the benefit, the benefit would then become taxable in the hands of the employee. There might or might not be a tax deduction available to the employer for the payment thus made. But because of the provisions of clause 67, it would not be seen as a valid transaction and, consequently, the fringe benefits tax would still apply. In other words, it would be a three time whammy. Could the Minister make that point clear? Senator WALSH(Western Australia-Minister for Finance)(11.16) —If the employer substitutes cash in lieu of the formerly provided fringe benefit, I cannot imagine any circumstances under which that would not be deductible from income tax on the part of the employer. That would not be regarded as an avoidance practice. I think the point Senator Messner made previously was that, depending upon the marginal rate of tax paid by the individual taxpayer, it may or may not lessen the joint or cumulative tax liability of the employer and the employee. Whether or not it did that would depend on the marginal tax rate of the taxpayer and whether that rate is lower than or different from that paid by the employer. That is possible, but I think it is highly unlikely for two reasons. Firstly, as from 1 July 1987 the individual and the corporate maximum tax rate will be the same. Secondly, the personal rate under the published rate scale will cut in at $35,000 of personal income. Very few people on incomes below that level receive fringe benefits of the type or magnitude that would trigger the fringe benefits tax because the first $300, I think, of benefit is exempt. There are as well some other less specific exemptions. So in practice the situation to which Senator Messner is drawing attention, I believe, would rarely occur. But if it did occur, the answer is that cashing it out in that form would not be regarded as a tax avoidance practice. Senator BROWNHILL(New South Wales)(11.18) —I am a bit concerned that if an employer, particularly a rural employer, does not or cannot make an assessment or, in the opinion of the Commissioner of Taxation, makes an assessment of the value of the rented accommodation with which the Commissioner then disagrees, the Commissioner will then make the determination. In regard to the assets test, last year the Commissioner did revalue some rural properties. In the meantime people were very unfairly treated. An indication of the unfairness is that many have fought the assessments and won the arguments, and the valuation of their rural land has been reduced. I hope that the same situation does not occur in relation to clause 124. I want also to make a point about clause 72. This clause provides that where the employer has not made an assessment the Taxation Commissioner, as I have already said, will do so. Also, clause 74 refers to the fact that the Commissioner may amend his assessment up to three years after the year in question. Surely, this in effect means that if the Commissioner decides he has been too lenient and he sees a chance to grab a bit more money, the reverse of what I have already said could apply. Obviously a terrific amount of paper work will have to be kept by employers while this is going on. Would the Minister like to comment on that? Senator WALSH(Western Australia-Minister for Finance)(11.20) —I am advised that the Commissioner of Taxation will issue guidelines on the imputed rentals for these rural properties. If the employer is not willing to accept the Commissioner's suggested value, he will have the option of getting an independent valuer to place an alternative value on the house. But the Commissioner will not necessarily accept that alternative valuation. I think it ought to be pretty obvious why that is the case. The Tax Commissioner cannot give open-ended assurances that somebody else's valuation will necessarily be accepted by the Australian Taxation Office. In practice, leaving aside that small minority-I would have thought a minuscule number-of farm houses occupied by the employees of the farmer which are within reasonable distance of a substantial country town and therefore for which some sort of a rental market not related to being part of the employee relationship does exist, the reality is that the rest of the houses have a commercial rent value which is extremely low. If a house is 100 miles or even 50 miles from any town which has a population of 1,000 or more and which has a housing shortage, its market value for rental purposes is likely to be negligible. Although one cannot quantify it, the rental value for the purposes of this Bill is also likely to be pretty low and in remote areas it is defined, anyway, that were will be an automatic 40 per cent reduction. Senator CRICHTON-BROWNE(Western Australia)(11.22) —I hope the Minister will forgive me if this point is not immediately applicable to the clauses to which we are referring, but I suspect that it is in some respects. In looking at the remote area provisions, the calculation that is arrived at and the extent to which a pastoral property could fall within that definition, the definition at present refers to the 1981 census. Is there any intention on the part of the Government that, following the 1986 census, it will amend the provisions so as to accommodate the new statistics that will be available as a result of the new census? Senator WALSH(Western Australia-Minister for Finance)(11.23) —I would say yes, without any qualification, were it not for the fact that when this point was last looked at two or three years ago, prior to which the census base had been 1976, there was one town-Port Hedland, I think, was the town in question, but do not hold me to that-which had grown to the point where properties within the radius of a centre, whatever that radius was, which had a population above 10,000, would have been by the previous formula no longer defined as a remote area. I am not sure whether amending legislation was required, but I remember the issue. But the effect of that last review when more recent census information became available was that nobody who had previously been defined as being in a remote area was zoned out of the remote area definition. But, if I recall correctly, some were included in the definition because the population of the relevant town had declined between the time when the two censuses were conducted. Given that piece of history, I am reluctant to say that there would be an automatic and strict application of the formula when more recent, and therefore more accurate, census data became available. My expectation is that when the new census data becomes available, it will be used as the basis for a definition of a remote area. Senator BROWNHILL(New South Wales)(11.25) —I wish to ask three more questions. I think the Minister for Finance (Senator Walsh) has already said that the Commissioner of Taxation will let tax agents have a lot more information. A lot of accountants are very worried about the provisions in clause 120. I can understand the need for penalties and the control of tax agents, but I am concerned about the lack of information that they have at this stage. Obviously the Commissioner will need to give tax agents a lot more information than they have had in the past and I think the Minister has already stressed that in the debate. I hope that the agents will get that information pretty quickly because at this stage they are greatly worried. Clause 133 states that if a deemed state of hardship is proved, the Commissioner may-and I emphasise the word `may'-release the employer from the payment of the tax. The Australian Taxation Office does not have a very good record of releasing people from tax, so I remain rather sceptical about whether people will be relieved of tax or whether they will be hounded to pay it. The Minister claims that at the moment there is no rural crisis, so it will be very hard for people in the rural community to claim financial hardship and to prove that they are unable to pay the tax. I am worried that the Commissioner may well argue that, if an employer cannot afford to pay the fringe benefits tax on his employees, perhaps he cannot afford the employees. That will cause some problems in the rural community. My third question relates to clause 136 on page 107. Accountants to whom I have spoken are very concerned about the wording of the clause and they regard it as being very poor. They have suggested that the words `secure or maintain' be added so that the line reads `in relation to secure or maintain employment of an employee'. Senator Walsh —What line is that? Senator BROWNHILL —That is line 30. Otherwise the interpretation becomes difficult when it relates to children who are also employees. It brings up all sorts of inconsistencies. I mentioned this yesterday when the Minister for Community Services (Senator Grimes) was the Minister in charge of the Bill. Does one give the use of a motor car to one's son because he is one's son or because he is an employee? Similarly does one give the use of one's house to one's son because he is a son or because he is an employee? Senator WALSH(Western Australia-Minister for Finance)(11.29) —A lot of these are minor matters. There is some room for judgment, but the preface to the lines quoted by Senator Brownhill is `in respect of'. I am advised that it is quite common in Commonwealth legislation for those words to preface some definition, and that is believed to be adequate. Past experience has shown it to be adequate. On the question of clause 133 and the provision for hardship, I must point out that a similar if not identical clause is contained in the present Income Tax Assessment Act. The judgment will not just be made by the Commissioner of Taxation, but by a board consisting of the Secretary to the Department of Finance, the Comptroller-General of Customs and so on or such appropriate substitutes. This provision is not new; it is in the existing Act and the Commissioner will not have sole responsibility. Senator Brownhill —What about my question on clause 120 and the provision of information to tax agents? Senator WALSH —As Senator Brownhill expected, I am advised that substantial information will be forwarded to tax agents subsequent to the passage of this Bill. Senator MESSNER(South Australia)(11.31) —I wish to mention a number of matters that are covered by this particular group of clauses. First, there is the question of lodgment of returns in the forthcoming financial year. We spoke earlier about the problems faced by the accounting profession and others who are engaged in helping taxpayers meet their obligations. They will be under severe pressure during September and October of next financial year as they are forced to deal not only with the requirements of the income tax law of that time, which has been a long-standing obligation, but also with the brand new set of laws under the fringe benefits legislation. That appears to me to be something that may not have been thought through properly by the Government. Has it considered the impact of this, especially in the light of the very complicated nature of the legislation that we are discussing? It would seem a reasonable proposition to consider extension of the time for lodgment of returns certainly beyond the due date, as set down in the Bill, of 28 October this year. Perhaps the whole thing should be put off for three months so that it can be dealt with, say, by the end of January. This would give accountants and those who will be required to advise taxpayers time to deal with the great deal of paperwork that will ensue from the introduction of this legislation. We discussed this earlier, but obviously there will be problems about penalties for taxpayers not lodging their returns on time because of the additional work load. Quite clearly there will be problems associated with this. I wish to raise a point in respect of clause 68 which requires every employer who grants a taxable fringe benefit to lodge a return even if all the tax is paid through instalments. With income tax of course, no return is required if the income is below $4,595 and consequently that exemption applies. However, in the case of the fringe benefits tax there will be a requirement to lodge an annual return, whatever the situation and whatever the level of fringe benefit payable. Surely it would be sensible for the Government to provide the Commissioner of Taxation with the power of exemption to taxpayers lodging returns where there is no tax payable or no further tax payable, otherwise people will need to keep records for a long time for future audit purposes. That seems a sensible proposition in the light of this situation. Because of the very heavy paperwork load that will flow from the introduction of this brand new tax, quite clearly assistance will be needed from accountants, lawyers and registered tax agents. One point to which I draw the Government's attention is that currently no tax deduction is available to taxpayers who incur fees with registered tax agents under the ordinary income tax law. It seems to me that this means that accountants and lawyers who are required to help and advise in the preparation of this brand new system of taxation will be charging fees which their clients will not be able to deduct. That seems to be inequitable in light of the fact that expenses are normally deductible for the preparation of income tax returns and obviously are related to the carrying on of the taxpayer's business. Another point relates to the actual preparation of the returns of the taxpayers under this fringe benefits legislation. Obviously the obligation will be imposed on the employers of keeping records for their employees. It must be seen that in many cases, such as where cars are taken home or where fringe benefits accrue to employees from special expense allowances or reimbursements or whatever they might be, the proper record keeping of the employee as distinct from the employer is relied on very heavily. I wish to know what plans the Government has in mind if the situation occurs wherein if an employee loses those records or perhaps leaves the employ of the employer and at some future time when audit is undertaken by the Government and returns lodged maybe years before are being checked it is not possible to trace the employee or lay hands upon the records kept by him which are basic to establishing the case of the employer in substantiating his earlier returns. I hope some relief can be provided if an employee has destroyed the records. I note that there are some safeguards in respect of an employer having lost records, but it seems to me that the other situation is likely to cause undue trouble and concern to the business community if it is allowed to apply. Senator WALSH(Western Australia-Minister for Finance)(11.38) —On the question of difficulty in complying with the 28 October deadline-we went through that a couple of days ago too-the Commissioner of Taxation will grant reasonable extensions, as I think the Commissioner habitually grants reasonable extensions. The Government does not believe that there is a case for a blanket deferral. I can remember the same sorts of points that Senator Messner has just made being made in 1983, although they were exaggerated about tenfold on what Senator Messner just said, about the provisional payments system and the alleged impossibility of complying with the introduction by a certain date. There were demands for deferrals, and so on. As far as I know, there were no great problems involved in introducing the provisional payments system, because once the lobby group accepted that the political campaign that it was mounting would fail, it compiled with the requirements without any great difficulty or, as far as I know, any great confusion. Two more points should be made that are relevant to that issue. After the introductory period of the first three quarters, the system which will apply will be a provisional tax payment type of system and, therefore, quarterly returns will not have to be lodged. A quarterly assessment based on the previous year's payments will be issued. Also, the financial year-I am sure Senator Messner knows this, but he has not mentioned it-for this tax will end on 31 March instead of 30 June. So there will not be the bunching effect of the normal income tax administration and the administration of this tax at the same time. On the question of exemptions and records, I have forgotten which is the relevant clause, but we went through some of this question the other day. There is a provision in the Bill whereby any employer who, while exercising reasonable care, has lost or destroyed records will not be held liable for those records. I think similar provisions exist in the Income Tax Assessment Act. On the question of exemptions that Senator Messner raised, if no benefit is being paid, there is no need to grant an exemption because there is no liability. Senator Messner —Exemption to lodge a return. Senator WALSH —I do not think one can accept the proposition that there be a blanket exemption to lodge a return because there may be no liability at that stage or at any other time. Unless a return is lodged, the employer could well have commenced paying fringe benefits and the Australian Taxation Office would have no knowledge of their having been paid. If the knowledge subsequently became available the Taxation Office would be in at least a morally weak position to issue an assessment if the Commissioner had previously granted that employer an exemption. I know it is not the practice in all business, but in business generally it is a practice to keep records for seven years and, in many cases, for longer. Senator CRICHTON-BROWNE(Western Australia)(11.42) —I have just two short questions to ask the Minister for Finance (Senator Walsh). I do not wish to trespass back to clause 57; I think the issue is covered under clause 66. There is some confusion in my mind as to whether or not a residence provided at a subsidised rent to a priest or a minister in the form of a manse or accommodation attached to a church will attract a fringe benefits tax. The other matter I wanted to raise relates to clause 58 (2) in which a `disadvantaged person' is defined as: . . . a person who is intellectually, psychiatrically or physically handicapped or is in necessitous circumstance. Would the definition of necessitous circumstances embrace the Jesus people or Salvation Army people who may be required to be on 24-hour call at a hostel because it may be related to the providing of assistance to people with a drug or drink problem and therefore these people require attention for the full day? Senator WALSH(Western Australia-Minister for Finance)(11.43) —Strictly speaking, we have passed these clauses. The first question of the honourable senator was about a priest or a minister occupying a manse or a presbytery. In the Bill as it has been presented to the Senate that is clearly exempt. A question was also raised with regard to clause 58. For example, a Salvationist working at an alcoholics home or an alcoholics night refuge, or whatever one wants to call it, and who is required to live in at the night refuge, would not be affected by the tax. It is not limited to that, but that is as good an example as I can think of. Senator VIGOR(South Australia)(11.44) —I wish to raise a very small problem relating to clause 134, which problem is to be found throughout the taxation assessment Acts. Can the Minister for Finance (Senator Walsh) inform me about the process of service of documents or notices upon people? Clause 134 deals with: Service . . . of a notice . . . on a member of a partnership or on a member of the committee of management . . . The clause goes on to state other things. One of the considerations in that clause is that the service may be by post. During the course of the Estimates committees and the Supplementary Estimates committee hearings I got some assessments of the performance of Australia Post which suggested that a number of documents did not actually reach their destination or that they reached their destination late. I would like to know what class of post is intended to be used here. What type of guidelines are being set up either by the Department or the Minister or are intended to be set up to make certain that documents sent through the postal system are delivered if this provision is going to be used in any type of legal proceedings? Senator WALSH(Western Australia-Minister for Finance)(11.46) —Again, the provision is very similar, if not identical, to the relevant section in the Income Tax Assessment Act. I would expect that the same postal services that are used for that would be used for this liability. On the point that Senator Vigor has raised, while it is possible, maybe even probable, that some assessments posted are not received by the taxpayer, as a practical necessity I do not believe that there is any alternative other than for the Australian Taxation Office to assert that, because it has posted an assessment, the taxpayer has received it. If the Taxation Office were to say anything less than that there is the danger of massive tax evasion because half the taxpayers in the country might say `I did not get my assessment; it did not arrive', and who can prove that it did not? I think the onus of proof has to reside with the taxpayer and the Commissioner of Taxation because there is no practical alternative to it, while acknowledging that there might be a very occasional case where a taxpayer might have a legitimate grievance. Clauses agreed to. Clause 143 (Remote area holiday transport). Senator VIGOR(South Australia)(11.47) —I move: Page 130, omit paragraph (k), insert the following paragraph: `(k) either of the following conditions is satisfied: (i) the benefit is provided pursuant to the provisions of an industrial instrument relating to the employment of the employee; (ii) it is customary for employers in the industry in which the employee is employed to provide benefits of the same kind as the benefit provided to the recipient and to provide such benefits in similar circumstances to those that applied in relation to the provision of the benefit to the recipient.'. During the last few weeks the media have stuck doggedly to the car fringe benefits tax issue, even though the problems of people in remote areas have been drawn to their attention on a number of occasions. One of the problems that I see is an inability of a number of our media sources to look beyond their own circumstances. Unfortunately, this is a real problem because I have been getting a large number of calls from country and remote areas where they have had misunderstandings concerning the fringe benefits tax. I believe that fringe benefits taxation should be structured actually to fall upon benefits and not upon the removal of disadvantages. If we stop caring about those in the remoter parts of Australia because there are `no votes in it', we will help to dig the nation's economic grave. I have had a number of representations from the local government associations of Queensland and New South Wales about their particular problems. Those problems are ones which refer to and fall very heavily upon rural and remote area councils. I seek leave to incorporate in Hansard a letter from the Shire Council of Ilfracombe in Queensland which refers to these problems. I have shown the letter to the Minister. Leave granted. The letter read as follows- Mr D. Vigor,...23rd May, 1986. C/o Parliament House Canberra, A.C.T. Dear Sir, I am writing to express Council's concern over the effects the proposed Fringe Benefits Tax will have on our Shire. You may or may not know that the Ilfracombe Shire is a small Shire in the Central West of Queensland. As such, the rate base is small, there is no area in which expansion of the rate base could take place. The proposed Fringe Benefits Tax would cost approximately 1% of the Shire's rate revenue. As rates are the major portion of the Council's revenue any loss due to the tax would have to be offset in some other area. As Council do not undertake any activities which could be termed as frivolous, cutbacks would be felt most strongly within the community. In a community of this size, any cutbacks in services has a most adverse effect. A major portion of the tax would be in the area of subsidized housing rental. Council workers number over one half of the Ilfracombe population and subsidized rental is essential if we are to attract a qualified workforce. Should the proposed tax be passed into legislation, this Council would have to seriously consider a reduction in the permanent workforce. This alone would have serious ramifications for the community. I trust you will see the concerns of Council are based on concern for this community and will have their viewpoint in mind when you are called upon to vote for the legislation. Yours faithfully, Richard Britain, Acting Shire Clerk. Senator VIGOR —I thank the Committee. The letter points out that the shire has a very small rate base which does not offer any scope for expansion, particularly under the current economic climate and situation. A severe fringe benefits tax would force the council to cut back services and that would have disastrous effects on the community which the council services. The Acting Shire Clerk points out that the council workers number over one half of the Ilfracombe population and that a housing rental subsidy is essential if the council is to attract qualified staff. Those who are used to all the facilities of metropolitan life may not think about these disadvantages at great length. If we do not lift a finger to equalise opportunities and services we will have structural discrimination in our nation between those people living in cities and those people living in remote areas. The Fringe Benefits Tax Assessment Bill takes account of this remote area benefit but, in the course of discussions, I noticed a particular disadvantage with respect to holiday travel or to people travelling for their holidays from these remote areas to the nearest centre of culture, education or entertainment, which traditionally has been a benefit which has been granted to those employees. Unless the amendment which I have moved is passed, this benefit will be covered by the fringe benefits tax. I believe that if we actually disadvantage these remote areas we will lose a valuable part of our national heritage and identity. I would like, firstly, to pay tribute to the excellent, detailed work of Mr Ted Chown, Secretary of the Country Shire Councils' Association of Western Australia. He has devoted an enormous amount of time and energy to specifying and quantifying these problems for me. In our discussions with the Government we have achieved amendments and changes to the legislation in a number of areas which have been accepted. However, this one came in fairly late. I seek leave to incorporate in Hansard a letter from the Country Shire Councils' Association of Western Australia commenting on the Fringe Benefits Tax Assessment Bill and particularly on this problem. Leave granted. The letter read as follows- 20 May 1986 Senator D. Vigor C/- Parliament House CANBERRA ACT 2600 Dear Sir, FRINGE BENEFITS TAX ASSESSMENT BILL 1986 The Country Shire Councils' Association of WA has examined the above Bill, and asks that the following anomalies be corrected- 1 Remote Area Holiday Travel Free or subsidised travel provided under an award or industrial agreement for employees in remote locations will be taxable at 50% of the cost less any employee contribution. Generally, this type of provision exists in order to remove the disincentive of high travelling costs that accompany taking positions in remote locations. Return air fares to the capital city (or another equivalent) are provided by employers, including shire councils, north of the 26th parallel. By meeting such expenses employers are removing a disadvantage and not providing a benefit. Therefore, it is considered that the tax of this item does not fall within any fundamental principle of taxing fringe benefits. Even if it could be sustained that this item should be subject to FBT- it is unfair that the same discount should apply to the north-west (of WA), where there are disabilities of both isolation and extreme climatic intemperance as in other remote areas: the taxable value for areas north of the 26th parallel should be no more than 10% of the cost. there is no principle that would justify treating the same type of expense differently for employees under an award or industrial agreement to employees not subject to awards or industrial agreements. If the stipulation that ``the benefit is provided pursuant to the provisions of an industrial instrument relating to the employment of the employee'' is retained, the four shires in the Pilbara, for example, will be faced with an FBT bill of $142,348 on 100% of the cost of holiday travel, as none of the awards applying to Local Government provide for such benefits. 2 Housing Fringe Benefits-Remote Area Discount The arbitrary definition of what is and is not a ``remote area'', for the purpose of assessing the taxable value of subsidised housing, would be good enough under the present Income Tax legislation where only 10% of the market rental value is assessable to the employee, but discriminates heavily against shires (and employers) north of the 26th parallel, if 60% of the market rental value, less rent paid, is to be assessable to employers. The Treasurer said in his Second Reading Speech that the 40% remote area discount is in recognition of the cost disadvantages of constructing accommodation in remote areas. This percentage discount would generally satisfy employers with staff housing in the south of Western Australia, but as the attached tables indicate, an average building index for housing north of the 26th parallel is 1.56. The particularly high indices for some localities north of the 26th parallel, see Table 2, are caused by such factors as a need to build to withstand cyclonic conditions (wind pressures up to 250 km per hour) and extreme remoteness from supply of building materials and building labour. Because of the high indices of a significant number of these Local Government areas, the remote area discount on rentals north of the 26th parallel should be not less than 60%. 3 Car Fringe Benefits Local Governments nation-wide are particularly concerned about the level of taxable value applicable to car fringe benefits, especially when travelling to and from work is classified as private running, and while Local Government personnel receive some benefit from taking a car home, they are also allowed the privilege because they are liable to call-out, and to save the employer garaging and security costs. There are grounds, therefore, for arguing that running to and from work is business mileage. The high level of tax payable under the statutory formula method of assessing taxable values will lead some employers to withdraw private car use, and this regrettably will cause a decline in goodwill, and therefore productivity, and the ultimate losers in Local Government will be the employees and residents of the municipality. CSCA submits that the automotive industry, other Government revenue sources (income tax, sales tax, payroll tax, etc.) and employer/employee/consumer interests, would be better protected if car fringe benefits were calculated, in a full year, on the following statutory formula- Total Kilometres Travelled Taxable Value as % of Base Value Less than 25,000... 12 25,000 to 40,000... 8 More than 40,000... 4 It has been explained to CSCA membership that the objective of FBT is to close the loop holes whereby many Australians are currently avoiding or evading tax through taking fringe benefits from their employer other than cash. One cannot argue with this objective, but the fact remains that councils which have to provide fringe benefits in order to attract staff, often at very considerable cost to the ratepaying community, will now be taxed on the cost of this disability, at further expense to the ratepayer. An endeavour to pass on all or part of this tax to the employee will mean in some cases it will be more difficult to acquire employees for the district, and in other cases the employees will want penalty and overtime payments for concessions which they would otherwise provide. The worker and the community will be the loser. The Executive Committee of CSCA strongly believes- that the 50% discount on holiday travel to areas north of the 26th parallel is insufficient: such travel should either be exempt or taxed on 10% of the cost; holiday travel discount at the applicable rate should apply to all `remote area' employers, not just those providing holiday travel under an award or industrial agreement; the remote area discount on housing rentals north of the 26th parallel should be not less than 60%; and the proposed taxable value of car fringe benefits as a percentage of base value should be halved. CSCA would be most grateful if you would exert your influence to have changes to the Bill made, accordingly. Yours faithfully A. BLAKENEY E. L. CHOWN Secretary The Country Shire Councils' Association of WA (Inc) HOUSING FRINGE BENEFITS REMOTE AREA DISCOUNT (for local authorities above the 26th Parallel) TABLE 1 (attached) Construction Costs District Allowance for various Western Australian Localities (from Western Australian Building Management Authority). TABLE II Average Construction Cost Index for Localities in Local Government Areas above the 26th Parallel. Local Government Area Localities and Average Allowance Local Government Average Carnarvon... Carnarvon (1.32) 1.32 Upper Gascoyne... No information available - Meekatharra... Meekatharra (1.53) 1.53 Wiluna... Wiluna (1.60) 1.60 Exmouth... Exmouth (1.50) Learmonth (1.58) North West Cape (1.56) 1.55 West Pilbara... Onslow (1.55) Pannawonica (1.55) Paraburdoo (1.55) Wittenoon (1.75) Tom Price (1.57) 1.60 East Pilbara... Mt Newman (1.57) Marble Bar (1.88) Shay Gap (1.55) Goldsworthy (1.50) Mundimindi (1.78) 1.66 Roebourne... Roebourne (1.54) Karratha (1.43) Wickham (1.54) Dampier (1.46) 1.50 Port Hedland... Port Hedland (1.45) 1.45 Broome... Broome (1.63) 1.63 Derby-West Kimberley... Fitzroy Crossing (1.88) Derby (1.66) 1.77 Wynham-East Kimberley... Wyndham (1.68) Kununurra (1.72) 1.70 Halls Creek... Halls Creek (1.90) Turkey Creek (1,95) 1.93 TABLE III Calculation of Average Construction Disability for Local Government Authorities above 26th parallel. Local Government Area Average Construction Cost Index No. of Dwellings in Local Authority Area (ABS 30.6.85) Weighted Index (a) (b) (a) x (b) Carnarvon... 1.32 1970 2600.4 Upper Gascoyne... . . . . . . Meekatharra... 1.53 350 535.5 Wiluna... 1.60 354 566.4 Exmouth... 1.55 652 1010.6 West Pilbara... 1.60 2327 3723.2 East Pilbara... 1.66 2344 3891.0 Roebourne... 1.50 4317 6475.5 Port Hedland... 1.45 3875 5618.8 Broome... 1.63 1454 2370.0 Derby-West Kimberley... 1.77 1471 2603.7 Wyndham-East Kimberley... 1.70 1407 2392.0 Halls Creek... 1.93 574 1107.8 21095 32895.0 Average ``construction'' disability 1.56-total (a) x (b) / total (b) Senator VIGOR —I thank the Committee. The letter makes the point very strongly that the provision of yearly travel entitlements to those in remote areas is not a benefit; it is the removal of a disadvantage which people have. This disadvantage applies both to employees and to employers. Employees do not have access to facilities which most Australians can take for granted. Employers have no hope of attracting top-notch staff, such as shire engineers and people of this nature, in the face of stiff competition from elsewhere unless some travel is part of the employment package. Taxing such travel is a great disadvantage to this country as we must utilise our people's talents to the full. The amendment that I have moved seeks to equalise employment opportunities around the nation. Basically, the Government had allowed only a deduction of holiday travel if that was built into an industrial instrument. What we are doing with this amendment, which I believe the Government will be accepting, is extending this process to travel which is offered customarily by employers to members of their staff. The wording that I have used in my amendment is exactly the same wording as has been used in the housing area and I believe that it should apply also to holiday travel. Senator WALSH(Western Australia-Minister for Finance)(11.54) —In the spirit of ecumenism the Government is accepting the amendment. Amendment agreed to. Clause, as amended, agreed to. Remainder of Bill-by leave-taken as a whole. Senator MESSNER(South Australia)(11.55) —I put it on record that the Opposition was opposed to clauses 40 to 143 that we were discussing earlier although it chose not to divide on them. I address my remarks to clause 148, which has been the subject of some debate in the Senate. I merely want to put on record some interesting remarks that have been made about this clause of the Bill by the Law Council of Australia and, in particular, its Taxation Committee under the Chairmanship of Mr Kevin J. Burges. Earlier in the debate the Opposition spoke about what it sees as being the problems arising from the fact that, having established that there is an employer-employee relationship, that a fringe benefit is provided and that it is the prerequisite for the establishment of the imposition of the fringe benefits tax, clause 148 of the Bill appears to broaden the whole idea of the meaning of the words `in respect of employment'. Indeed, it seems that this can be extended to almost any situation. I instance the situation of a child working on his father's farm and occupying accommodation provided by his father. That might be thought to be being provided as part of the ordinary family arrangements but, because of the apparent breadth of clause 148, that could indeed be seen as being related to the employment of the son in the farming business. That is just one instance, but there are numerous others that we could put forward as examples of what we see as the apparent breadth of that clause and the interpretations that we believe will probably be put upon it by the Commissioner of Taxation and others at some later time when assessments flow into the Taxation Office. For that reason, I would like to record in Hansard the advice of the Law Council of Australia. I quote from the letter I mentioned earlier: Hence, to take the case of a private company director, the link with employment comes in at two stages. Firstly, in the definition flowing from section 221a of the Income Tax Assessment Act, the amount paid to the director must be `by way of remuneration'. Secondly, under the definition of fringe benefit the benefit must be `in respect of the employment'. Thus, the provisions quite properly seek to limit the tax to something relating to employment. In other words the benefit must be a true `fringe benefit' or part of an `employee remuneration package', which was the original evil this legislation was said to be aimed at. However, this is virtually nullified by the provisions of section 148 (1). That section reads down the essential link of the fringe benefit being provided `in respect of the employment' to the extent that the connection is virtually eliminated. This appears from the sub-clauses (a) and (h) especially of section 148 (1). These provide that a reference to the provision of a benefit to a person in respect of the employment is a reference to the provision of such a benefit whether or not it is also provided in respect of some other matter or thing, and whether or not the benefit is provided as a reward for services rendered by the employee. I make the point again that the Law Council supports the point we were making in earlier debate on this matter. It seems that the extension by virtue of clause 148 will make it so that, even though something may be provided in respect of some other relationship existing between two people, if there is some connection, be it past, future or current, that relates to the employment of that person by the other, it could be overridden by virtue of this clause so as to bring it within the total aegis of the law and treated as a fringe benefit. As an example, I spoke of a son working for his father or for the family business, which happens to be an incorporated company, and receiving some kind of remuneration in cash and then receiving wedding presents or some other kind of gain or benefit as a result of his family relationship with his employer. Having debated this matter at length for some time, I wanted merely to put the opinion of the Law Council of Australia on the record. Hopefully, that will lead to the interpretation of the law in the way in which it has been explained by the responsible Minister during the debate over the last few days. Senator SIDDONS(Victoria)(12.03) —I place on record the fact that the Australian Democrats also received lawyers representing the Law Council of Australia yesterday. They drew our attention to a possible conflict in clause 148. We did not have time to get any legal opinion on their contention and, as such, the Democrats are not in a position to state firmly one way or the other whether we believe there is a problem with clause 148. Prima facie it appears to us that there is very likely a conflict in the clause. I believe that at this late stage all the Democrats can do is join with the Opposition in drawing the Government's attention to a potential problem in the legislation. I hope we will get an assurance from the Minister that this matter will be looked at. It does seem to be quite serious. Senator WALSH(Western Australia-Minister for Finance)(12.04) —Any reasonable request to look at any clause will be acceded to. Like Senator Siddons I would not make any pretence to making any judgments about whether all the claims that have been made have any validity. But I want to observe for the record that a lot of lawyers make a lot of money out of nitpicking and speaking at learned seminars. Question put: That the remainder of the Bill stand as printed. The Committee divided. (The Chairman-Senator D. J. Hamer) Ayes . . . . . . . . . . . 34 Noes . . . . . . . . . . . 28 —— Majority . . . . . . . . . 6 —— Aulich, T. R. McKiernan, J. P. Black, J. R. Macklin, J. J. Bolkus, N. Maguire, G. R. Childs, B. K. Mason, C. V. J. Coates, J. 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. McIntosh, G. D. (Teller) Zakharov, A. O. Alston, R. K. R. Knowles, S. C. Archer, B. R. Lewis, A. W. R. Baume, Peter MacGibbon, D. J. Bjelke-Petersen, F. I. Messner, A. J. Boswell, R. L. D. Newman, J. M. Brownhill, D. G. C. Parer, W. R. Carrick, Sir John Puplick, C. J. G. Chaney, F. M. Reid, M. E. Collard, S. J. Sheil, G. (Teller)Crichton-Browne, N. A. Teague, B. C. Durack, P. D. Townley, M. Guilfoyle, Dame Margaret Walters, M. S. Hamer, D. J. Watson, J. O. W. Hill, R. Withers, R. G. Coleman, R. N. Kilgariff, B. F. Grimes, D. J. Short, J. R. Colston, M. A. Jessop, D. S. McClelland, Douglas Vanstone, A. E. Button, J. N Baume, Michael Question so resolved in the affirmative. Bill, as amended, agreed to. FRINGE BENEFITS TAX BILL 1986 FRINGE BENEFITS TAX (APPLICATION TO THE COMMONWEALTH) BILL 1986 FRINGE BENEFITS TAX (MISCELLANEOUS PROVISIONS) BILL 1986 Bills-by leave-taken together. Question put: That the Bills be agreed to without amendment or requests. The Committee divided. (The Chairman-Senator D. J. Hamer) Ayes . . . . . . . . . . . 34 Noes . . . . . . . . . . . 28 —— Majority . . . . . . . . . 6 —— Aulich, T. McKiernan, J. P. Black, J. R. Macklin, M. J. Bolkus, N. Maguire, G. R. Childs, B. K. Mason, C. V. J. Coates, J. 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. McIntosh, G. D. (Teller) Zakharov, A. O. Alston, R. K. R. Knowles, S. C. Archer, B. R. Lewis, A. W. R. Baume, Peter MacGibbon, D. J. Bjelke-Petersen, F. I. Messner, A. J. Boswell, R. L. D. Newman, J. M. Brownhill, D. G. C. Parer, W. R. Carrick, Sir John Puplick, C. J. G. Chaney, F. M. Reid, M. E. (Teller)Collard, S. J. Sheil, G. Crichton-Browne, N. A. Teague, B. C. Durack, P. D. Townley, M. Guilfoyle, Dame Margaret Walters, M. S. Hamer, D. J. Watson, J. O. W. Hill, R. Withers, R. G. Coleman, R. N. Kilgariff, B. F. Grimes, D. J. Short, J. R. Colston, M. A. Jessop, D. S. McClelland, Douglas Vanstone, A. E. Button, J. N. Baume, Michael Question so resolved in the affirmative. Fringe Benefits Tax Assessment Bill 1986 reported with amendments and the Fringe Benefits Tax Bill 1986, Fringe Benefits Tax (Application to the Commonwealth) Bill 1986 and Fringe Benefits Tax (Miscellaneous Provisions) Bill 1986 reported without amendment or requests; report adopted. Motion (by Senator Walsh) proposed: That the Bills be now read a third time. Senator MESSNER(South Australia)(12.18) —It is a day of shame for the passage of this legislation which will obviously impose considerable hardships upon the Australian business community at a time when investment is called for, when a commitment to develop the Australian economy is called for, and at a time when we have had the worst economic results for many years which have clearly resulted from the management of this Hawke Labor Government. It comes at a time when we need more incentive in business and more incentive to create jobs, yet this Government persists in introducing a measure which will destroy jobs in the car industry, the rural community and across the broad spectrum of the Australian economy. Why the Government is so persistent with this measure fails all understanding. We, on this side, as we have demonstrated consistently throughout this debate, stand clearly for the repeal of this ridiculous legislation which will impose further costs not only on the Government and through that on the taxpayer, but also directly on business in such a way as it will destroy jobs. I will return in a moment to one or two points in that respect, but I will correct firstly some of the assertions made by the Minister for Finance (Senator Walsh) earlier in the debate a couple of days ago when he reported the remarks of Mr Joseph O'Neill who is the Director of the Catholic Family Welfare Bureau of Adelaide. The Minister quoted Mr O'Neill as being supportive of the fringe benefits taxation. However, Mr O'Neill has now contacted the Opposition and wishes it to be known that he had been misquoted and misinterpreted by the Minister in this regard. While it is true that he believes that there is inequity in the taxation system-and nobody would disagree with that-he believes that the Government, in deciding to tax the employer rather than the recipient of fringe benefits, avoids confronting the inequity and social injustice issue. The scandal of an inequitable tax free area for lowly paid, as well as highly paid people, remains. Taxing the employer compounds the injustice, since employers are obliged to pay the additional tax, which inevitably will be passed on to the consumers, who are most likely to be the lower paid earners in the community. Quite clearly, the result of this stupid taxation measure will result in further impositions not only by way of direct tax costs, but also by inflation in the supermarket and in the cost of living for ordinary Australians. That will be the result of this taxation measure, and the Government stands condemned for it. During the debate we drew attention to the fact that the Government is plainly wrong in its assumption as to the real effects of the legislation. The impact of the new system will be to encourage employers to cash up and pay out the benefits which have otherwise been provided up until now in cash. That will mean that those employers will obtain a tax deduction for that amount, and that means that the received amount in cash by the low income earners, by the employees, will be taxed in their hands. So the net result of this measure will be to tax the employee not the employer. It is quite clear, if one reads the Hansard, that my argument shows quite clearly that the top income earners who are on fringe benefits will not be in that category of workers who find that their benefits are cashed out. It will be those at the lower end of the income scale, those who are paying less than 29 per cent taxation, who will find that they will have to pay tax on the cashed out benefits. That is the Government's intention. It is the intention of those opposite to encourage employers to do that, and it will mean that the employee will end up paying the tax, not the employer. That will be the end result of this most ridiculous and stupid measure which will also have the effect of destroying jobs on the way through. Finally, I would just like to test this legislation against the criteria set down by the Prime Minister (Mr Hawke) regarding tax reform. We spoke earlier of the nine taxation commandments which Prime Minister Hawke laid down before the National Taxation Summit which proved so disastrous last year. There are three in particular to which I draw the Senate's attention. The first is: `Any reform must simplify the system so that all Australians can understand it more easily, and therefore make avoidance and evasion more difficult'. If anything is going to perpetuate avoidance and evasion it is this measure; people will be encouraged to avoid it because it is a greater imposition. How can we possibly claim that this fantastically convoluted and complicated piece of legislation simplifies the tax system in Australia? It simply does not. It will require hundreds of public servants to administer it; it will impose huge workloads on the business community to keep individual records of what every motor car they run is doing in the way of mileage, how many gallons of fuel it is using, how many nuts and bolts being applied to it, and so on. This will add incredibly to the cost of employing people in the community which in the end means that jobs will be destroyed. The second commandment is that any reform must provide the best possible climate for investment, growth and employment. Clearly, this tax will destroy all of those things and will work in exactly the opposite way to the Hawke so-called commandments. The third commandment is that any reform package must have widespread community support. I cannot imagine a tax measure that has less community support than this one has. Clearly, as a result of the detailed information to business put out by the Government, a widespread understanding of this legislation is sinking in and people are realising that it is going to destroy jobs in this community. It is a sad tragedy for Australians that we cannot take a stand right here today to defeat this measure. I make a last call to the Australian Democrats to join with the Liberal and National parties and vote against this legislation at the third reading stage and thereby destroy this iniquitous and ridiculous measure which can only destroy the potential for investment and recovery in this economy. Senator SIDDONS(Victoria)(12.26) —I rise to speak very briefly on the motion for the third reading of this legislation. The debate has been long and tedious. However, I believe that I should draw attention to the contrast between the Australian Democrats' point of view on this legislation and that of the Opposition. Members of the Opposition have opposed this legislation outright at every possible stage and spoken at length on the clauses at every possible opportunity. It would have been easy for the Democrats to have joined with the Opposition. Such action would have destroyed this legislation. However, it would have destroyed a very significant attempt to crack down on widespread tax avoidance and rorts in the community. Something had to be done about fringe benefits being used as a blatant means of tax avoidance. The Australian Democrats recognised that. We recognised the inequity of the system. Therefore, we discussed the matter with the Government to see whether the worst aspects of this fringe benefits legislation could be altered to lessen its impact. At no stage have we agreed with the general thrust of what the Government has done. We believe that the legislation is too complicated and that it could have been simplified. However, the fact remains that there is a need for such legislation. The Democrats are not in the business of standing flat-footed, blocking a very important Government initiative and leaving the way open for the Government to call a double dissolution on this matter if it wished to do so. I believe that the approach by the Opposition was very simplistic. As I mentioned during the Committee stage, the Democrats' negotiations and discussions with the Government have resulted in a $200m saving on the fringe benefits tax on motor cars alone. When I stated that during the Committee stage, the Opposition would not believe that there would be a $200m saving. Let me do the simple arithmetic. Only three lines are needed to show the way in which that saving can be achieved. Let us assume that the average price of a motor car is $16,000. Our tax breaks will result in an average reduction of 5 per cent in the taxable price of a car. Senator Parer —Big deal! Senator SIDDONS —The honourable senator says that it is a big deal. I will explain why that is so. This 5 per cent reduction translates into 2.5 per cent reduction in tax payable by companies. This equals-I am sure the simple arithmetic is obvious even to the Opposition-$400 a car. If we multiply that amount by the 500,000 motor cars involved in respect of this tax the answer, believe it or not, is $200m. This is not an insignificant concession by the Government as a result of the Democrats' efforts in this area. We also discussed with the Government the problems of welfare organisations. We pointed out that the fringe benefits tax could apply to welfare organisations in an unfair way. In September and October last year the Government gave us an assurance that genuine existing welfare organisations would not be disadvantaged. In fact, when the legislation came forth we found that the Government had not really honoured its promise as far as welfare organisations were concerned. We discussed the matter with the Opposition, and last night an amendment was moved to take account of genuine welfare organisations. As a result, those organisations will not be disadvantaged. These two very significant and important changes to the legislation have been made since debate first took place on the fringe benefits tax. At no stage have the Democrats been prepared to block important legislation which attempts to make a fundamental tax reform in an area that has been crying out for reform. Senior executives and people in the top echelons of business have been getting all kinds of fringe benefits on which they have not been paying tax. That situation is unfair and inequitable. Something had to be done about this situation which had been escalating at a dramatic rate year by year. At least this legislation is now in a form that will not affect dramatically jobs in the motor car industry. The amended fringe benefits tax on motor cars will save, as the industry itself says, between 10,000 and 20,000 jobs. This is a very, very significant factor. For that reason we are proud of the stand that the Democrats have taken. At least it is far more imaginative and far more constructive that the attitude of the Opposition which is: `We will block the legislation; we will use this as an excuse to go to the people in an early election'. Senator MICHAEL BAUME(New South Wales)(12.32) —I simply wish to respond very briefly to the point made by Senator Siddons on behalf of the Australian Democrats. Senator Puplick —Labor rats. Senator MICHAEL BAUME —I point out that the disgraceful role of the Democrats, in allowing this destructive and disastrous legislation through, resulted in the convenor of the Hawkesbury branch of the Australian Democrats ringing me this morning and saying that he is resigning his position in disgust at the Australian Democrats' performance. I might also mention that a representative of a major Australian-wide construction company rang my office seeking assistance with the fringe benefits tax booklet. The representative rang the New South Wales telephone number listed in that booklet but the people he talked to could not answer the simple questions he put relating to the use by construction firms of four-wheel drive vehicles on remote sites. He also rang the Melbourne inquiry number but could get no answer to his question. Senator Messner —It sounds like the assets test again. Senator MICHAEL BAUME —Exactly. The people in Melbourne did not know the answers. Senator Walters —He would not have got the answer from the Democrats either. Senator MICHAEL BAUME —That is the important question. That is exactly what happened when he did ring the Australian Democrats. Senator Sir John Carrick —He would probably get two different answers-both of them wrong. Senator MICHAEL BAUME —The answer he did get was that they did not want to enter into discussions on the fringe benefits tax with someone who was vitally affected in this way. They did not want to know. The Australian Democrats did not want to talk to a person who was experiencing a major problem which would do immense damage to his business and his capacity to employ people basically because he would say things to them which would be totally contrary to the arrant nonsense that we have heard in this chamber from these people. As my good friend Senator Puplick said a little earlier by way of interjection, `the Australian Democrats' may be their title, but they are the Australian Labor rats in this chamber. Question put: That the Bills be now read a third time. The Senate divided. (The President-Senator the Hon. Douglas McClelland) Ayes . . . . . . . . . . . 35 Noes . . . . . . . . . . . 29 —— Majority . . . . . . . . . 6 —— Aulich, T. McIntosh, G. D. Black, J. R. McKiernan, J. P. Bolkus, N. Macklin, M. J. Childs, B. K. Maguire, G. R. Coates, J. 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. Georges, G. Siddons, J. R. Gietzelt, A. T. Tate, M. C. Giles, P. J. Vigor, D. B. Haines, J. Walsh, P. A. Jones, G. N. (Teller) Zakharov, A. O. McClelland, Douglas Alston, R. K. B. Knowles, S. C. Archer, B. R. Lewis, A. W. R. Baume, Michael 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. (Teller)Chaney, F. M. Sheil, G. Collard, S. J. Teague, B. C. Crichton-Browne, N. A. Townley, M. Durack, P. D. Walters, M. S. Guilfoyle, Dame Margaret Watson, J. O. W. Hamer, D. J. Withers, R. G. Hill, R. Coleman, R. N. Kilgariff, B. F. Grimes, D. J. Short, J. R. Colston, M. A. Jessop, D. S. Button, J. N. Vanstone, A. E. Question so resolved in the affirmative. Bills read a third time. Debate resumed from 29 May, on motion by Senator Grimes: That the Bills be now read a second time. Senator WALSH(Western Australia-Minister for Finance)(12.40) —In closing the second reading debate I do not intend to say anything, other than to note that some Government amendments will be presented in the Committee stage and I understand that there are also some Opposition amendments. Question put: That the Bills be now read a second time. The Senate divided. (The President-Senator the Hon. Douglas McClelland) Ayes . . . . . . . . . . . 35 Noes . . . . . . . . . . . 29 —— Majority . . . . . . . . . 6 —— Aulich, T McIntosh, G. D. Black, J. R. McKiernan, J. P. Bolkus, N. Macklin, M. J. Childs, B. K. Maguire, G. R. Coates, J. 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. Georges, G. Siddons, J. R. Gietzelt, A. T. Tate, M. C. Giles, P. J. Vigor, D. B. Haines, J. Walsh, P. A. Jones, G. N. (Teller) Zakharov, A. O. McClelland, Douglas Alston, R. K. B. Knowles, S. C. Archer, B. R. Lewis, A. W. R. Baume, Michael 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. (Teller)Chaney, F. M. Sheil, G. Collard, S. J. Teague, B. C. Crichton-Browne, N. A. Townley, M. Durack, P. D. Walters, M. S. Guilfoyle, Dame Margaret Watson, J. O. W. Hamer, D. J. Withers, R. G. Hill, R. Coleman, R. A. Kilgariff, B. F. Grimes, D. J. Short, J. R. Colston, M. A. Jessop, D. S. Button, J. N. Vanstone, A. E. Question so resolved in the affirmative. Bills read a second time. Sitting suspended from 12.47 to 2 p.m. Senator BUTTON(Victoria-Leader of the Government in the Senate) —I inform the Senate that the Minister for Community Services, Senator Grimes, will be absent from the chamber during Question Time today. Any questions which would normally be directed to Senator Grimes in relation to his portfolio or to those he represents should be addressed to the Minister for Education, Senator Ryan. Any questions concerning the management of Government Business in the Senate should be directed to me. Senator CHANEY —My question is addressed to the Leader of the Government in the Senate. I refer to reports that the Government is considering ways in which it might stimulate the level of private sector investment. I refer the Minister also to criticism of investment performance, particularly from the trade union movement, and note that there has been little attempt to address the reasons for the slump. Can the Minister explain why he believes that we have now experienced three successive quarters of reduced private capital investment? Senator BUTTON —The simple answer to the question is largely because of high interest rates. That is my interpretation of why there has been a lower level of investment in the past three quarters. Also there has probably been a little uncertainty in some sectors of the business community about the value of the dollar. I think those things have been factors which have probably influenced the matter. The honourable senator referred to the slump in private sector investment. Let me remind him that in the middle of last year private sector investment was running at quite a better rate than the Government had expected. Private sector investment until quite recently was running at a better level, particularly in the area of manufacturing, than the Government had expected. Further, I make the point that many of the problems of the manufacturing sector, particularly at the moment, are related most strongly to the appalling level of private sector investment in manufacturing during the 1970s. I saw a report recently by a bank or some other organisation which made the point that private sector investment had increased by a level of one per cent each year during the 1970s, which was not comparable with private sector investment in other countries. It is that very low base which is of most concern to the Government and should be of most concern to thinking commentators in looking at the question of the trade difficulties with which this country is currently bedevilled. Senator CHILDS —The Minister for Veterans' Affairs will be aware of calls by the Australian Medical Association for its member doctors to scrap wholesale bulk billing of disadvantaged patients, such as the unemployed, pensioners and low income earners. Will this decision have any impact on Veterans Affairs' beneficiaries? Will the Minister outline his response to the AMA's call? Senator GIETZELT —In response to Senator Childs's question, I confirm that my Department has been having discussions for quite some months with the Australian Medical Association over the question of fees. However, the latest statement from the Australian Medical Association does not acknowledge that point. Therefore, I think it is fair to assume that veterans are to be caught up in the latest proposal of the Australian Medical Association to discontinue the principle of bulk billing, upon which the Department of Veterans' Affairs has operated since World War I. My Department pays local medical officers-there are close to 11,000 of them-85 per cent of the schedule fee plus a 60c surcharge per patient as an added bonus for treating repatriation patients. The Australian Medical Association for the last couple of years has suggested that that 60c surcharge per patient is inadequate. In November last year the AMA served notice on the Department that if the 60c surcharge were not increased, it would consider directing doctors to withdraw services to veterans. I find it somewhat disconcerting as well as alarming that the medical profession fails to appreciate the current economic conditions or to respond to the pleas that have been made by the business community generally for a degree of restraint. It appears that it is not prepared to apply the principles of restraint which many commentators and economists have suggested that all sections of the Australian community should take on board. I do not know of any medico who is losing money, going bankrupt or living in straitened circumstances. In fact, doctors who have repatriation patients have a steady clientele. They can ask the patient to come back as often as they wish. The Department's commitment to the payment of LMOs is very considerable. The Commonwealth, of course, would be billed through Medicare for 85 per cent of the schedule fee in regard to veteran patients. If the AMA's proposition was adopted, the individual patient would then be billed the difference between that figure and 100 per cent of the fee. I find this completely unacceptable, as doctors' incomes through Medicare are subsidised to the extent of $2.6 billion a year. One can only say that it is an avaricious attempt by a well-heeled section of the Australian community to take advantage of the current situation in order to create even further difficulties for the Government, which is taking a responsible attitude to health services, including veterans' affairs. Senator ARCHER —Can the Minister representing the Minister for Science confirm that in the last three years Commonwealth funding for the Bureau of Meteorology re-equipment program has fallen $1.3m short of the Australian Science and Technology Council recommendations, despite the fact that ASTEC warned that these funding levels should be regarded as an absolute minimum? Will the Minister give an assurance to commit $33.5m to the Bureau over the next five years, in light of the dire warnings from the meteorology policy committee that without such action a major breakdown in the Bureau's fragile warning infrastructure, with serious implications for safety of life and limb, is a real possibility? Senator BUTTON —I cannot confirm any of Senator Archer's dire forebodings. Let me say that I take it that what the honourable senator said is correct. I always try to be charitable and understanding in regard to the veracity of questions asked in this place. In regard to the second part of the question, it is a matter which must be addressed in the Budget context. I have heard noises to suggest that it is high on the agenda for consideration in the budgetary process. I guess an announcement will be made at the appropriate time. Senator MORRIS —Is the Minister representing the Minister for Transport aware of criticism that spending on the national road system is slowing down? How much is the Federal Government spending on the development of Australia's national highways? How much of the system has been completed to date? What progress is being made in New South Wales? Senator GIETZELT —The Government's record on road allocations is well recognised by the States and the Northern Territory as being reasonable considering the general economic climate of Australia. For example, in 1985-86 the Federal Government has allocated a record $1.245 billion to the States and Northern Territory for roads. This is an increase of 82 per cent over the amount provided in 1981-82, the second last year of the previous coalition Government. The major priority that the Government has set itself is to upgrade the national highway system to provide for the safe, efficient and reliable carriage of traffic between Australia's mainland capital cities, between Brisbane and Cairns and between Hobart and Burnie. The Government accepts the need for an efficient highway system, not only for the purpose of the carriage of passengers, but also for the carriage of goods because we recognise the importance of that to the nation as a whole. Therefore, the Government accepts the full construction and maintenance costs of the national highway system. Most of the $560m which the Federal Government has allocated for roads in the 1985-86 Budget will be spent on national highways and that represents a considerable increase on the projects that were approved by the previous Government under the national highway program for the Bicentenary. I think it can be said without any doubt that this Government has accepted its responsibility for improving our national highway system and has put its money where its mouth is. Senator CHIPP —My question is directed to the Minister representing the Minister for Defence. Does the Dibb report on the Review of Australia's Defence Capabilities agree that self-reliance is the most sensible and effective defence for Australia? Does the Government accept this idea and does it believe that, if it is able to convince the Australian public that defence self-reliance is possible for Australia, the electorate will question the use and need for the American alliance and will reject ANZUS because it does not serve this nation's defence needs but is part of the United States' military planning and thinking? Senator GARETH EVANS —I notice that the Minister for Defence indicated yesterday in his statement on the Dibb report that there is no contradiction whatever between a self-reliant Australia and the maintenance of our alliance relationship with the United States. That point is dealt with in considerable detail by Mr Beazley in his statement and I refer Senator Chipp to it. In fact, I seek leave to incorporate the relevant paragraph of the statement in Hansard. Leave granted. The statement read as follows- A self-reliant Australia is an expectation both of the Australian people and of our allies. It has been required by our principal ally, the United States since the early 1970s. This requirement has been reiterated by successive United States administrations. In a major policy statement in November 1984, Secretary of Defense Caspar Weinberger said `We have learned that there are limits to how much of our spirit and blood and treasure we can afford to forfeit in meeting our responsibility to keep peace and freedom. So while we may and should offer substantial amounts of economic and military assistance to our allies in their time of need, and help them maintain forces to deter attacks against them we cannot substitute our troops or our will for theirs.' The previous government recognised the relationship between self-reliance and a sound contribution to alliance relationships when it said in its 1976 white paper: `This self-reliant posture derives essentially from our own national interests and responsibilities. It also accords with our status as an ally of the U.S., for by accepting our local responsibilities we can contribute to the alliance relationship and to the U.S. global effort.' The ability to defend itself is the absolute minimum that any self-respecting country should contribute to an alliance. Australia can scarcely pretend to contribute to the defence of broader western interests if it cannot even defend itself. Indeed, as U.S. Secretary of Defense Weinberger said at the National Press Club in April, `Defence of a country's own borders and own airspace and the sea around it, obviously, is a prime attribute of sovereignty and, of course, has to be one of the first priorities of any country.' So a policy of self-reliance contributes to the strength of the alliance. And Australia makes a further substantial contribution to western security, as well as to international stability, by hosting the joint defence facilities and through a range of other cooperative activities, such as regular visits by ships of the U.S. navy. Equally, the alliance with the United States contributes to Australia's ability to defend itself. Mr Dibb concludes that a self-reliant defence of a continent the size of ours demands access to intelligence, high-technology sensors and military equipment. For much of this the United States is the best source by far, and for some it is the only source. This is an important conclusion, and one which should not be overlooked in our thinking about the defence relationship with the United States. Our U.S. alliance will remain a significant deterrent to any potential aggressor. Any nation contemplating the use of force against us would have to reckon with the help-including possibly the direct military assistance which the U.S. might provide to Australia. That possibility would inevitably be a major complication in the plans of any would-be attacker, and thus it serves as a powerful deterrent. Senator GARETH EVANS —I also refer Senator Chipp to page 46 of Mr Dibb's Review of Australia's Defence Capabilities which spells out in some detail the practical benefits of the ANZUS relationship to Australia's independent defence interests. These benefits in short include access to the highest levels of military technology and intelligence, without which it would be impossible for a population the size of Australia's-only one-half of one per cent of the earth's population-to attempt to exercise military control over 10 per cent of the earth's surface as the Dibb review recommends. Indeed, a self-reliant defence posture is impossible without the kind of technological assistance which the United States gives us. On a broader level again, the United States alliance remains a powerful deterrent to any would-be attacker. Lastly, it should be pointed out that our hosting of the joint facilities under the alliance-although not, of course, ANZUS itself-contributes to the security of all Australians by strengthening deterrence in the short term and improving prospects for arms control in the longer term. Once these points are fully appreciated-as I am sure they are already by most Australians-there will be no question whatever of the use and need for the United States alliance being questioned. Senator McKIERNAN —My question is directed to the Minister for Education. I refer her to a report in today's Canberra Times which alleges that there have been course approval delays at the Canberra College of Advanced Education which have affected student graduation. These delays are said to have been caused by `hitches in administration' and call into question the whole process of accreditation. Can the Minister inform the Senate whether these claims are correct and can she explain who is responsible for the delays in accreditation? Senator RYAN —I am aware of the report in today's Canberra Times claiming delays in accreditation of Canberra CAE courses. The report is wrong factually in several ways and before I point those out I wish to explain to the Senate that accreditation and national registration of advanced education courses are part of the system nationally agreed between the Commonwealth, the States and the Northern Territory. Canberra College of Advanced Education courses undergo the same accreditation processes as courses in the States with the exception that CCAE courses do not have to be accredited before being introduced. Accreditation is the public certification that the course meets agreed standards. Because it is the assurance of course quality for students, employers and the community, it is important that it be undertaken properly. It is my responsibility, and not that of the assessment panels, to approve the accreditation and reaccreditation of courses. I am advised in this matter by a part-time committee-the Commonwealth Institutions Accreditation Committee for Advanced Education. The number of assessment panels convened by the Committee has increased from nine in 1984 to 23 in 1985 and some 30 are expected to be convened in 1986. As a result, my Department has restructured the accreditation secretariat and provided additional staff increasing the number from only one in 1985 to three at present. These increased staffing resources have been provided at the expense of other areas of the Department. I have been reviewing accreditation procedures and have recently approved new procedures which would allow the college to take more responsibility for the administration of course assessment. In addition, the whole matter of accreditation procedures was discussed by the Committee and the CCAE last month and agreements were reached about measures to streamline accreditation processes from both ends. The newspaper report contains a number of inaccuracies which need to be corrected. Delays in accreditation which may have affected graduations are generally the responsibility of the college where courses have been submitted late. There have been instances where the college has taken up to three years from the date of the first intake into the courses to put forward a submission. However, I understand that the new arrangements discussed by the college and the Committee will avoid such problems in the future. The claim that there are 88 courses awaiting approval by the Department of Education is nonsense; 54 have not yet been submitted by the college. The CIACE, the accreditation committee, will have arranged panel visits by the end of this year for all courses so far received. I reject the notion that the whole process of accreditation has been called into question. Accreditation is an important assurance of quality to the community, employers and students. The accreditation process is nationally accepted and all Ministers for Education have recently agreed to include the technical and further education sector in the process through the establishment of the Australian Council on Tertiary Awards. I am confident that the new procedures and arrangements agreed by me and discussed between the Committee and the college will minimise delays in the accreditation process. Senator Lewis —I seek leave to move that the Senate take note of the paper. The PRESIDENT —Order! I suggest that the honourable senator should do that at the end of Question Time. However, he may seek leave if he insists. Leave not granted. Senator TEAGUE —My question is directed to the Minister for Education and also concerns this extraordinary confusion that has arisen for the Canberra College of Advanced Education, to which Senator McKiernan has already pointed. It also concerns the Minister's failure, or that of her Department, to administer the cumbersome bureaucracy required for the accreditation of advanced education courses. The explanation that has been given that accreditation is important still leaves these questions open. Is it correct that there are courses which have been submitted to the Minister or the Department for two years and which have not yet been accredited? Is it true that there is confusion in that graduation ceremonies have been held when diplomas have been granted with the undertaking that the correct name and content of the diploma would be inserted when the course became lawful-that is, when the Minister's accreditation had been administered? Do the partial remedies that the Minister has offered here today meet fully the requests of Dr Parfitt, the Principal, and Dr Overheu, the Pro-Principal? Finally, how many other colleges of advanced education in Australia are free from this kind of disarray? Senator RYAN —I thought I gave a very long and adequate answer to the matters raised by Senator Teague in my answer to Senator McKiernan's question. Because I endeavoured to be as comprehensive as possible I had some objection to the form of my answer from Senator Lewis. Nonetheless, Senator Teague has seen fit to rise and ask in very garbled terms a question similar to Senator McKiernan's. I have given the information in answer to those questions. If Doctor Parfitt is responsible for the media reports in the Canberra Times I am sorry to say that Dr Parfitt is seriously wrong. The delays, as I have been pointing out, are delays at the college end. There have been cases of students being in courses for three years without a submission having come from the college to the Commonwealth Institutions Accreditation Committee for Advanced Education for approval. If there are any other outstanding matters, I do not have information about them yet. If Senator Teague had listened to the answer instead of getting himself into a state of excitement about asking the same question again, I think he would have been much better off. Senator TEAGUE —I ask a supplementary question. Is the Minister saying that although she is responsible for this confusion, and she admitted it clearly, she is not able to say that she has met all of the requests of the Canberra College and that she is involved at the moment in a dispute with the Canberra College of Advanced Education? I also asked the Minister a specific question. If she cannot answer them now, will she undertake to give answers in due course? Senator RYAN —I must make it clear that I have not said that I am responsible for the delays and confusion and I have not said that my Department is responsible; I have said that the Canberra College of Advanced Education is responsible. Senator BOLKUS —I refer the Minister representing the Treasurer to an article by David Barnett in this week's Bulletin which makes claims about the effects of the Government's tax reforms on the tourist industry, the restaurant industry, farmers, shopkeepers and consultants. Will the Minister indicate whether the figures contained in the article and the views expressed therein are accurate? Senator WALSH —I would be surprised if anything that Barnett has written were accurate-it would be purely by accident. The purpose of the article is clearly a desperate last ditch attempt to scare the wits out of the Australian Democrats with regard to the fringe benefits tax legislation and an equally desperate last ditch attempt to preserve rorts and rip-offs-an area in which David Barnett has a long and undistinguished history. Among other things he quotes an organisation with the acronym BAND-which is Business Against Non-Deductibility. That is the same organisation which, just before Christmas, advertised that, as a result of the ending of the businessman's free lunch, the breweries and the wineries would suffer grievously. I drew attention to this in answer to a question in the Senate and said that BAND was the organisation that was implying that executives were in the habit of getting on the booze at lunchtime at taxpayers' expense instead of going back to their offices and doing some work. After I said that, the organisation dropped the reference to the breweries and wineries from its advertisements. Nevertheless it is continuing its campaign. David Barnett, completely uncritically, quotes this organisation as having conducted what he calls a survey of restaurants in Brisbane and Adelaide, which showed that in Brisbane there has been a 15 per cent decline in turnover. He went on to say that 11,000 jobs had been lost in the restaurant industry. As far as I can tell, he did not even attempt to source that statement to BAND. Senator Cook —Did Barnett work for Fraser? Senator WALSH —He did. I will say something about that later on. That figure of 15 per cent can be compared with another figure quoted by Len Evans, with whom the Chairman of the Liberal Party's Waste Watch Committee has had a long and intellectually incestuous relationship. Mr Evans, in one of his recent self-indulgence columns, regurgitated some of the shonky figures which Senator Michael Baume has presented on this issue and then claimed that his restaurants had lost 23 per cent of their trade, which, I would have thought, is a comment more on the quality of Mr Evans's restaurants than on the ending of the free lunch. If 23 per cent of their trade was dependent upon the tax deductible lunch, and Mr Evans has lost 23 per cent, and on any objective evidence that is available other restaurants in the country, on balance, have lost no trade at all, I think something is being said about the quality of Mr Evans's restaurants. Senator Chaney —Mr President, I take a point of order. Clearly the Minister is debating the question. I am sorry that the Standing Orders do not permit me to take a point of order which would remind you and honourable senators that the Minister is simply traducing anybody who dares say anything against this Government. It is the most pathetic abuse of this chamber. I take the point of order on the basis that the Minister is clearly debating the question. He should be made to give a straightforward answer and then have to sit down. The PRESIDENT —Order! I remind the Minister of standing order 100 which clearly says that in answering a question a senator should not debate the matter. I ask the Minister to bear that in mind in the completion of his answer. Senator WALSH —Certainly, Mr President. I shall stick to questions of fact. In the article to which Senator Bolkus referred, Barnett asserts: A farmer who drives into town to buy spare parts and takes along his wife so she can visit the supermarket will incur fringe benefits tax. Wrong! He continues: A shopkeeper who buys his child a birthday present and then subsequently puts him to work behind the counter will retrospectively incur fringe benefits tax . . . Wrong! David Barnett states: People using company cars will be required to keep log books with a daily record showing the date of each journey, the odometer readings at the beginning and end, the number of kilometres travelled . . . Wrong! The article continues: Farmers also will have to record each trip out into the paddocks and whether it was to, say, deliver hay to their stock or to fix a fence. Wrong! That is not an exhaustive assessment of the errors of fact in the article. Ironically in the very same issue of the Bulletin, there is a letter from Mr Wrigley, the Director-General of the Australian Security Intelligence Organisation, in which Mr Wrigley responds to a previous and equally false argument from Mr Barnett about ASIO. Mr Wrigley says, among other things: I had heard from the ASIO officer with whom he spoke-- `he' being Mr Barnett-- on the telephone a few days previously that Mr Barnett had called, ostensibly to ``check some information'', but that he seemed to have been singularly unresponsive to advice on that information. Moreover, when my man offered to have me call him back, Mr Barnett's anxiety to go into print with what he had already written evidently overcame any temptation the offer may have presented. That is typical of Mr Barnett's journalistic style. He rang-- The PRESIDENT —Order! The Minister is now clearly getting into the area to which standing order 100 relates. I ask him to bring his answer to a conclusion. Senator WALSH —Certainly, Mr President. The evidence was incompatible with the predetermined conclusions, so it was ignored. Finally, as Senator Bolkus's question suggests, Mr Barnett has a long history of being a defender of rorts and ramps, which is probably related to the fact that he was the greatest rorter of the lot. Indeed, in the first year that he was Mr Fraser's Press Secretary, he stuck his snout so far into the public trough that he nearly poked a hole in it. Senator Chaney —Mr President, I take a point of order. The information which we are about to cop has already been put down once in the Senate. Again, I think the Minister is being totally self-indulgent to the detriment of Question Time and in breach of the Standing Orders, which require him to answer questions or to desist. The PRESIDENT —Order! I ask the Minister to bring his answer to a conclusion. Senator Chipp —I wish to speak on the point of order, Mr President. In this article, this journalist, if one can use the term loosely, has abused a great number of individuals and organisations. He has done this on occasions totally without any basis of fact at all. I do not know how many readers he has, but we have no way of responding to those vile allegations except in this place. I suggest that the credibility of Mr Barnett is severely under question and that the Minister is quite entitled to report to the Senate some of the background of this gentleman. The PRESIDENT —Order! Senator Bolkus asked Senator Walsh a question. Standing order 100 states: In answering any such Question, a Senator shall not debate the matter to which the same refers. It is my responsibility to see that the Standing Orders are adhered to. It is my opinion that Senator Walsh is getting well into the realm of debate. I therefore ask him to bring his answer to a conclusion. As to Senator Chipp's point of order, I suggest to him that there are ample opportunities other than Question Time for honourable senators to raise any matter in this place. Senator WALSH —Mr President, I am just finishing. In that year he drew a salary of $38,743 and $63,584 in overtime making a total in excess of $102,000 which was more than the Prime Minister drew. Senator Bolkus having addressed a supplementary question to the Minister representing the Treasurer- Senator Chaney-Mr President, I ask you to stop this farce and to rule that that is not a supplementary question. The PRESIDENT —Order! I rule the supplementary question out of order. Senator BROWNHILL —I refer the Minister for Industry, Technology and Commerce to the dramatic decline in world prices for orange juice and the threat to the Australian industry through the cheap importation of Brazilian orange juice concentrate that has fallen approximately 44 per cent in price since last June. When will the Government respond to the industry's request for special assistance to help the industry adjust to this dramatically changed market situation? Can the Minister advise the Senate whether an Industries Assistance Commission inquiry is to be held? If so, can he ensure that this proceeds with the utmost urgency? Senator BUTTON —I try to cover the 78-odd industries that fall within my portfolio but I must say that I have not given a high priority to orange juice. Nonetheless, from the point of view of orange juice producers and orange squeezers who are employed in various establishments, no doubt it is a very important question. I am fully aware of the increased market share of the Brazilian orange juice industry, if that is how the honourable senator described it, and the dramatic fall in prices of orange juice. I am not aware at this stage of any request for assistance having been made by the industry but I will look into that. The industry has a couple of options. Whether it seeks an IAC inquiry in search of temporary assistance or whether it alleges that the product in question has been dumped are two of the avenues open to it. I am certainly not aware of either of those steps having been taken, but if they have been taken I will try to provide a more detailed response to the honourable senator as soon as possible. Senator REYNOLDS —Has the Minister representing the Minister for Aboriginal Affairs seen the article in this week's Catholic Leader headed `Aboriginal land threatened by Cairns deep-port plan'? Can the Minister report on what action the Federal Government will take to protect the Aboriginal community at Yarrabah in far north Queensland where the State Government has betrayed promises of secure land tenure by proceeding with plans to develop an access road and deep port on Aboriginal land? In view of the assurances of two Federal Ministers of Aboriginal Affairs to give unequivocal guarantees that land rights interests will be protected, will the Minister ask Mr Holding to move quickly to honour those commitments to ensure that deeds of grant in trust cannot be manipulated by an opportunistic State Government that has no regard for Aborigines? Senator RYAN —I am aware that my colleague the Hon. Clyde Holding has had discussions with his counterpart in Queensland the Hon. R. C. Katter Jr on this and other matters relating to Aboriginal land in Queensland. I also understand that Mr Katter has held extensive discussions with the Yarrabah Council and community. I gather that both Mr Holding and the Yarrabah people have received assurances from Mr Katter that there is no cause for concern and that no excision will proceed. Nevertheless, the Commonwealth will be watching developments closely and working to ensure that Commonwealth policy principles are satisfied. To assist the Council in its deliberations the Commonwealth has provided funds to retain independent legal advisers. Senator REYNOLDS —Mr President, I ask a supplementary question. Can the Minister advise whether that guarantee has been received by Mr Holding in writing? Senator RYAN —I do not have information available to answer Senator Reynolds's precise question. I will endeavour to get that answer for her before the end of Question Time. Senator CHANEY —My question, which is directed to the Minister representing the Minister for Aboriginal Affairs, follows that asked by Senator Reynolds. I refer to Senator Reynolds's assertion that the Queensland Government has betrayed the promises it made to Aboriginal Queenslanders. I ask the Minister: Did she, as shadow Minister for Aboriginal Affairs, promise that the first legislative act of a Labor government would be to pass legislation which would take these matters out of the hands of the Queensland Government and to vest them in this Parliament and the Federal Government? I also ask her whether she has seen the article which was referred to by Senator Reynolds which includes this paragraph: Then came a Federal Labor Government which promised much more than the unequivocal guarantee. It is now history that the promises of Mr Clyde Holding, the present Federal Minister for Aboriginal Affairs, were smashed on the rocks of political expediency and economic rationalism. When does the Minister expect to keep the promises that she made to the Aboriginal people of Queensland? Senator RYAN —It is the case that, when our Government came to office in March 1983, we had a very firm commitment that Aboriginals all over Australia should be able to get secure title to land. Indeed, I believe that it was one of the first acts of our Government that Mr Holding, who became the Minister for Aboriginal Affairs in the Hawke Government, immediately undertook discussions and consultations with a view to developing uniform land rights legislation. The history of that exercise is very well known in this place. The exercise was often the subject of questions and debates. Honourable senators will know that, after proceeding in a very thorough and dedicated way to try to get an agreed piece of legislation-legislation which will have the support of the Aboriginal community throughout Australia-Mr Holding was not able to get that agreement. Consequently, he decided that, for the time being, the matter of land rights should be pursued at State level. That is not to say that our existing platform on land rights has been changed nor do I believe that it will be changed at our Federal conference in June. But it is to say that because of the unsympathetic political climate that was created mainly by the efforts of Senator Chaney's colleagues and cohorts in Western Australia and their red-neck supporters in the mining and pastoral industries, it was not possible for Mr Holding to proceed in the way in which we had intended to proceed, which was by way of national, uniform, land rights legislation. Nonetheless, it is the case that, since we have been in office, Aboriginal people are to get secure title to a considerable portion of land in Western Australia, which is a lot more than can be said for what happened during the period the Fraser Government was in office and particularly the period when Senator Chaney was the Federal Minister for Aboriginal Affairs, when one of the greatest acts of desecration of Aboriginal land in Noonkanbah took place. I think it is very important, when considering the current achievement of land rights by Aboriginal and Islander people throughout Australia-an achievement which we do not think has yet reached its fulfilment-to bear in mind the history of our efforts to achieve that and the particularly negative and destructive role played by the Liberal Party of Australia in Western Australia. Senator Chaney having addressed a supplementary question to the Minister representing the Minister for Aboriginal Affairs- The PRESIDENT —Order! The Leader of the Opposition is extending the question beyond a supplementary question. I rule it out of order. Senator ELSTOB —My question is directed to the Minister representing the Minister for Foreign Affairs. Does the Minister believe that tension spots in the Middle East are undermining people's confidence in peace, disarmament and future security? Does the Minister accept that existing peacekeeping forums are the only means to resolve these conflicts? If not, does the Minister believe that Australia could play a more important role in encouraging middle power nations to adopt positive initiatives by sensible and responsible settlements rather than military settlements in bringing peace to the area? Senator GARETH EVANS —The Government has frequently expressed its deep concern over the serious tensions and conflicts which afflict so many of the nations of the Middle East. We have been particularly concerned over the Gulf war, the conflicts in Lebanon, the tensions which persist over the Arab-Israeli dispute and, of course, the increase in terrorist incidents emanating from the region. The tensions and conflicts which continue to plague these nations are indeed a threat, as Senator Elstob says, to international as well as regional security and do demand the urgent efforts of all nations. The answer to Senator Elstob's question so far as the Government is concerned is that the most useful role that Australia believes it can play as the kind of nation we are is, essentially, through the United Nations. As a member of the United Nations Security Council we played an important role in recent times in the deliberations of the Council on many of these disputes, and most recently in the efforts over the Gulf war and the situation in Lebanon. We continue to believe that it is through international efforts that solutions to many of the problems of the Middle East can be found. Certainly we will be maintaining our efforts in that respect. The Government continues to believe that the United Nations peacekeeping efforts provide an important element in the maintenance of international peace and security. United Nations peacekeeping forces are stationed in many of the world's trouble spots. UNIFIL, the United Nations Interim Force in Lebanon, is attempting to bring greater calm to that troubled country. The United Nations Disengagement Observer Force, UNDOF, in the Golan Heights is undertaking the critical task of separating Israeli and Syrian forces. UNTSO, the United Nations Truce Supervision Organisation, is performing a valuable observer function in both Lebanon and in the Gulf war. The United Nations Force in Cyprus, in which Australia participates, is discharging its responsibilities in Cyprus, as is the United Nations Military Observer Group in India and Pakistan in the Kashmir region. The Government believes that it is important to maintain the existing structures and to make them more effective. Senator CHANEY —My question is addressed to the Minister for Education in her capacity as Minister representing the Minister for Aboriginal Affairs. I refer to an article by Father Frank Brennan in the Catholic Worker of April 1986, entitled `The End of Mr. Holding's Dreaming'. Mr President, I refer to the passage which I quoted in the supplementary question which you ruled out of order where, referring to the Labor Party's promises, he said: The broken promises are the greatest breach of faith committed by any Government towards Aboriginal people since white settlement. He went on to say: Their votes having been bought, they have been betrayed . . . Why were the promises ever made? At no time did Federal Cabinet resolve to honour them. I ask the Minister: When is she going to keep the promise she made to the Aboriginal people and introduce the legislation that she so boldly introduced when she was in Opposition and when she was powerless? Senator RYAN —I have not read the article by Father Frank Brennan that Senator Chaney quoted. He is entitled to his views. He is a very passionate worker in the interests of Aboriginal land rights and I believe has contributed a great deal to raising the consciousness of the community, particularly the church community in Queensland, about land rights. I suppose he, like our Federal Labor Government, has had to contend in that campaign with the deliberately racist and mischievous exercises that we have seen in the State of Queensland and in the State of Western Australia. I suppose I can best answer Senator Chaney's question about when our Government will be prepared to revive the measures set out in the private member's Bill which I introduced in this place several years ago by asking him when he will be able to assure the commitment and support of his Party at the Federal and State levels for these very same principles. Senator ZAKHAROV —Has the Minister representing the Treasurer seen a pamphlet produced by the Scotch College Foundation, which I believe is the Melbourne Scotch College, in association with the National Australia Bank, seeking funding through what it refers to as an interest accumulation program, known as the cash deposit plan, enabling friends of Scotch College to assist the school without donating capital? The pamphlet-I think it is important to quote this-states: The School needs a large capital base, the income of which can be used by the School to contain fees, provide further scholarships and achieve its goal of financial independence by the year 2000-- I am glad of that-- By law, tax deductible donations to the Building or Library Funds cannot be used for these purposes. The interest earned on a donor's money-- The PRESIDENT —Order! The honourable senator is giving far too much information. I ask her to confine her question to a question. Senator ZAKHAROV —I am nearly finished. I just wanted to make it clear what the plan was. The PRESIDENT —I request the honourable senator to confine her question to giving as little information as possible. Far too much information is being given in questions being asked. Senator ZAKHAROV —This plan claims to create a maximum cash advantage for the school at a minimum loss of income to the donor. I ask: Is this scheme lawful? If so, is it consistent with the Government's tax strategy? The PRESIDENT —Order! In future when lengthy questions of that nature are asked, I intend to direct that the questions be put on notice. Senator WALSH —If I may comment on Senator Zakharov's interpolation, if the school is self-supporting by the year 2000 that will be good news, I suppose, for the government of the day, but one would have to question whether the means by which it seeks to achieve self-supporting financial status are acceptable. I have seen the pamphlet and also a covering letter which were apparently sent out to old boys of the Scotch College in Melbourne. The covering letter cynically describes the scheme as `an Irish tax deduction'. The scheme is that an amount of money is lent by an old boy-there are not any old girls-or possibly by anybody else to the Scotch College Foundation and the interest received on that amount of money is then credited to the investment fund, whereas if the so-called donor was to invest the money himself and receive the interest himself, he would have to pay tax on the interest received. If he subsequently donated an equivalent amount to the College it would not be tax deductible if it was donated for recurrent purposes. The pamphlet also makes it clear that donations paid to the building or library funds are tax deductible, but it is not permitted that those donations then be used for recurrent expenditure. The pamphlet says: By law, tax deductible donations to the Building or Library Funds cannot be used for these purposes. Taking that at face value it demonstrates clearly that the purpose of the scheme is to get around the spirit, if not the letter, of the taxation law. Senator Zakharov asked me whether the scheme was lawful. That is not a matter on which I feel I can give a definitive opinion. However, I just say that taken at its face value-as it is described by those who have set it up-it would have to be a breach of the spirit, if not the letter, of the taxation law. For a more definitive ruling I will refer the matter to the Treasurer. Senator CHANEY —My question follows that asked of the Minister for Finance, who seems to be suggesting that there is something sinister about interest-free loans to non-profit organisations. I ask: Did his Government make an exception or exemption for interest free loans made to old people's homes when it implemented its assets test arrangements as an acknowledgment of the very common practice of having such loans to assist in the running of organisations of a non-profit nature? Senator WALSH —I cast no moral aspersions on the practice of people making interest-free loans. What I have said is that, if the purpose of the scheme is to get around the taxation law and if the scheme is as described in the pamphlet, which says that by law tax deductible donations to the building or library funds cannot be used for this purpose-that is, for recurrent expenditure-but the people who devised the scheme have worked out arrangements under which they can be used for those purposes, there is clearly a breach of the spirit, if not the letter, of the law. Senator SIBRAA —Is the Minister for Veterans' Affairs aware of a proposal by the Returned Services League to build a memorial in Canberra commemorating the historic links between soldiers of Australia and Greece? Is it a fact that Turkish authorities have approached the Australian Embassy in Turkey over this matter? Can the Minister inform the Senate of current developments? Senator GIETZELT —Some confusion has arisen and concern has been expressed about the Prime Minister's announcement on his recent visit to Greece that we would assist in the proposal to establish a memorial at an appropriate site in Canberra near the Australian War Memorial to commemorate the Australian-Greek involvement in World Wars I and II. The purpose of the memorial is to pay tribute to the co-operation that existed between our two peoples in those wars. It is to be funded by Australian veterans of the Greek campaign as well as the Greek community in Australia. Australia wants to have firm and friendly relations with both Turkey and Greece. In fact, it was in that context that I was directed by the Prime Minister to proceed to Turkey last year in respect of the seventieth anniversary of the landing on Gallipoli when the Turkish Government established a memorial to Australia's involvement in that campaign. Simultaneously there was a dedication of a memorial area here in Canberra. There is no suggestion in the Australian Government's agreement to participate in the request by the Returned Services League and prominent Australians that there is any offence intended in regard to our relationships with, or in regard to the way we approach our friendship with, the Turkish people and the Turkish Government. The memorial will commemorate those Australians who fought and died in the Greek campaign, particularly in World War II, with special emphasis on the support they received from our Greek allies during the battle for the island of Crete in 1941. The memorial will also honour those Australians in World War I who were buried on Greek soil. The battle for Crete was a major engagement for Australian forces during World War II. There is a substantial monument on Crete testifying to the deep feeling of gratitude which the Greek people have towards the Australians who fought in that battle. I was honoured to be present at that commemorative service last year. I assure Senator Sibraa that the erection of the proposed memorial is not politically motivated but flows from a genuine community concern to commemorate important events in Australia's military history. In no way is it to be construed as an unfriendly act to any other nation. It is a recognition of the special relationship that exists between the Australian people and the Greek people. Senator MACKLIN —Does the Minister for Education accept responsibility for, firstly, the overseas student office in Malaysia informing one and a half thousand students studying for Australian matriculation that admission to tertiary study in Australia will be based on matriculation grades; secondly, that office reversing its decision to one of admittance based on earlier local examinations, only three weeks before the matriculation results were to be published; and, thirdly, a further reversal of that decision after students had already been admitted to Australian tertiary institutions, to the detriment of many other students who had passed matriculation? If the Minister does not accept this responsibility, who is responsible? Senator RYAN —I will have to have the allegations made in Senator Macklin's question checked out before I can discover whether they are the case and who is responsible for them. I am aware that there was a mistake in advice given. By the way, there is not an overseas office in Malaysia. At the moment the program is being handled by officers of the Department of Immigration and Ethnic Affairs. The transfer to the Department of Education is virtually complete now. However, in January this year some information was given out through our High Commission to the effect that only Australian matriculation results would be accepted for entrance to Australian universities. This was wrong. Subsequently, and I think quite quickly, it was corrected. It was made clear to all the relevant authorities that the results of the local Malaysian examinations would also be accepted by tertiary institutions in Australia. I had the opportunity to explain that to the Malaysian education authorities when I was in Malaysia shortly after the mistake had occurred. That mistake occurred. It was corrected. I certainly have no knowledge that there was any reversal of that matter. I cannot see why there should be, since that is the policy. I will have to ask Senator Macklin to provide me with the information on which he has based his question and will have the matter checked out. To the best of my knowledge that initial mistake was quickly clarified and students were then accepted into institutions according to their tertiary entrance scores, which could be based either on the Malaysian examination or on Australian matriculation examinations. Senator JONES —My question is directed to the Minister representing the Minister for Employment and Industrial Relations. Has the Minister's attention been drawn to the latest Australia-wide figures on industrial disputes produced yesterday by the Australian Bureau of Statistics? If so, can the Minister confirm that, even after making allowance for the effects of the South East Queensland Electricity Board strike in Queensland last year, Queensland has the worst industrial relations record of any State in the Commonwealth? Senator McKiernan —Again? Senator JONES —Yes, again. Does this in turn show that the approach to industrial relations by the Queensland Government is, to say the least, less than reasonable? Senator WALSH —I have seen a summary of the statistics. They do indeed confirm that Queensland has the worst industrial relations record of any State in the Commonwealth. For the 12 months to February 1986-the most recent figures available-in Queensland 270 working days were lost per 1,000 employees, the highest for any State, compared to the national average of 208. It may be recalled that even more horrendous figures came out of Queensland last year as a result of the SEQEB strike. The comparable figure for the 12 months for the year before those to February 1985 was 452 working days lost per 1,000 employees in Queensland. Although the figure has declined from 452 to 270, that is substantially as a result of the one-off effect of the SEQEB strike. Of course, in both years those figures represented the worst industrial relations record of any State. The figures released yesterday cover the first rolling period which starts to get clear of the cause of the horrendous past figures, which were the result of the SEQEB strike. Seventy per cent of the working days lost as a result of that strike were in February 1985. There is no doubt that the Queensland Government's approach to industrial relations is less than subtle and less than successful. One wonders how much more of the Liberal's industrial relations policy at Federal level is born out of admiration for those activities in Queensland. One would certainly hope that that is the case and that the Liberals will not get a chance to apply those sorts of attitudes nationally and reproduce in every other State the appalling record which has been established in Queensland. Senator PETER BAUME —My question directed to the Leader of the Government in the Senate concerns the proposed inquiry into claims of migration of nazi war criminals to Australia. I think there was a Press report today about this inquiry. Will the report of this inquiry be made public either in full or in a sanitised form? In particular, will full details be made public to allow judgment by Australians of several claims, the first of which is that resettlement was sought in Australia for Mr Klaus Barbie, and the second of which, to quote an official document, is that `some nazi war criminals may have slipped into our system'. Senator Ryan —And into your Party. Senator PETER BAUME —I missed that interjection, Mr President. The PRESIDENT —Order! Will the honourable senator ask his question. Senator MacGibbon —I raise a point of order, Mr President. I ask that that very offensive remark of the Minister's be withdrawn. The PRESIDENT —There is no point of order. It was a remark made in the generality and not in respect of any individual. Senator MacGibbon —It was not a generality; it was directed to Senator Peter Baume's party. The allegation was very clear. The PRESIDENT —It was not made in respect of the parliamentary Liberal Party. There is no point of order. Senator PETER BAUME —Will a judgment be made as to whether or not the United Kingdom Government sought to discourage any new trials of nazi war criminals after August 1948? Will details be given of whether any people thought to be nazi war criminals are currently in Australia? Are claims about any particular people made in the Parliament of New South Wales by Mr Frank Walker based on any good evidence of nazi war criminal behaviour by those people? Senator BUTTON —I am able to provide Senator Peter Baume with some information about the question he asked, but not in replete detail; I may be able to get further information for him. An informal inquiry into claims that war criminals entered Australia after World War II is to be conducted by a former senior public servant. The appointment and details of the inquiry have yet to be announced. The inquiry would have full access to all government files and United Nations documents. The Special Minister of State will have ministerial responsibility for the inquiry. An examination by officers in the Department of Immigration and Ethnic Affairs of available records has so far failed to disclose evidence of the involvement of those named in war crime. After the Second World War membership of the nazi party was sufficient grounds for rejection of entry into Australia. In 1955 that policy was changed. Membership of the nazi party was no longer a reason in itself for rejection. Membership of other organisations under the umbrella of parties such as the SS and the Gestapo and certain concentration camp staff as well as convictions for war crimes remain reasons for rejection. In 1955 the change to policy was made public. A list of the names of former nazis are not kept, but under government policy of past days some former nazis did enter Australia. It would not be prudent to give an unequivocal guarantee that no war criminals came to Australia. Records indicate former nazis did migrate. The possibility of war criminals acquiring false papers and identities or of providing false information to gain entry into Australia cannot be ruled out. Until investigations are concluded it is not appropriate to speculate about particular individuals. Allegations abound. Evidence of involvement of individuals in war crimes is lacking. In relation to the call for a royal commission which was made in some circles, the Government is not convinced that a royal commission is justified at this time. I conclude by saying that present policy on entry includes provision that all individuals are assessed on any threat they may pose to the Australian community. At the start of this question Senator Baume asked me particularly about whether the findings would be made public. As I indicated in my answer the appointment and details of the inquiry have yet to be announced. I will draw Senator Baume's request-I take it to be a request as well as a question-to the Special Minister of State and I will ask him to have that matter addressed when the details of the inquiry are being considered. Senator GARETH EVANS —Senator Coates yesterday asked me a question yesterday about Press reports of a dangerous radioactive substance being imported into Australia in very unsafe circumstances. I undertook to investigate the matter. I am now able to advise the Senate of the results of that investigation. My answer, Mr President, is a long one but because of the public interest this matter has raised I think I ought to read it in full. Americium, the substance in question, is used in a variety of industrial applications in Australia, including smoke detectors, permitted quantities of activity being specified under State legislation; demonstration alpha sources in educational establishments where, again, permitted quantities of activity are also specified; and as a neutron source in combination with beryllium for research purposes, and for other applications such as the measurement of moisture content in soils for geological surveys and road constructions. Americium is not itself produced in Australia, so all supplies are imported, mainly from Amersham International Pty Ltd in the United Kingdom. Americium-241 is produced by neutron irradiation of the plutonium-239 target with subsequent beta decay. Some 15 companies import americium-241 into Australia. Imports of radioactive materials including americium are controlled under the customs prohibited imports regulations. Under these regulations anyone who wishes to import radioactive material for use in industry, as in the case of lightning-arresters, the matter in issue here, requires Australian Atomic Energy Commission permission. The applicant must show that he has a State licence permitting him to use the radioisotope for the purpose specified in the application. With regard to the Tasmanian lightning-arresters, the subject of yesterday's report, I understand that the company involved, E.F. Australasia Pty Ltd, makes a variety of products, including some lightning arresters with no radioactive components. I understand that the particular arresters in question here make use of a gold-silver foil sensor coated with up to 10 millicuries of americium. The company is licensed by the Tasmanian Radiological Council to manufacture lightning-arresters using americium. I understand that the conditions of that licence do not permit sales of these items in Tasmania. The use of such lightning-arresters is not permitted in Australia, consistent with a recommendation of the National Health and Medical Research Council in November 1977 that: In the light of available evidence, the use of radioactive material in lightning conductors for the nominal purpose of increasing their efficiency should be discouraged in the interest of public health. the protection of workers and the public in connection with the manufacture of goods containing radioactive materials is covered by State legislation. While exports of certain radioactive materials are controlled under the customs prohibited exports regulations, these regulations do not apply to americium and hence export of these lightning-arresters does not presently require an export permit. In regard to the shipment and handling of these lightning-arresters, both within the State and overseas, the manufacturer is required to conform to Commonwealth and State regulations governing the safe transport of radioactive materials. These regulations, which incorporate the International Atomic Energy Agency's regulations for the safe transport of radioactive materials, set out strict packaging and labelling requirements. The consignor is also required to complete documentation setting out details of the particular radioisotope in the package to be shipped. Within Australia, the transport of radioactive substances by road and rail comes under the control of each of the States involved. Air transport and interstate marine transport is controlled by the Commonwealth under the Air Navigation Act and the Navigation Act respectively. In the case of these lightning-arresters, I understand that all shipments of radioactive components have been exported in accordance with the relevant Commonwealth and State transport regulations. However, when two damaged arresters were returned from Singapore by air to Hobart via Sydney last February, they were not packaged or labelled as containing radioactive material. When this was discovered I understand the Tasmanian Department of Health informed the Singapore Radiation Protection Inspectorate, as the competent authority in Singapore, expressing its concern and seeking an explanation for the consignor's lack of compliance with international requirements. The Health Department also informed Singapore Airlines, the international carrier for this package. It concerns me that this type of lightning arrester is still being manufactured for export nine years after the NH and MRC had clearly indicated their use should be discouraged on health grounds. As I have indicated, Commonwealth approval is required to import americium, and I have asked for the situation to be reviewed. I would also hope the Tasmanian Government would reconsider whether the manufacture of lightning conductors using americium should be permitted in that State. Senator GARETH EVANS —Senator Sir John Carrick asked me a question yesterday about allegations by the United States of America of Soviet non-compliance with the Strategic arms Limitations Talks II. I have a full answer for him which, again, is very long. I understand that Senator Sir John Carrick would prefer me to read it so, under the circumstances, I am afraid that I will trespass again on the Senate. Obviously this, again, is a matter of some importance. The most recent United States Administration reports on Soviet non-compliance with arms control agreements address seven issues concerning Soviet compliance with the SALT II Treaty. In four cases a firm violation of the Treaty provisions is alleged. These are as follows: First, flight testing and deployment of a prohibited second new type of intercontinental ballistic missile, that is to say the SS25; secondly, encryption of ballistic missile telemetry; thirdly, exceeding the number of strategic nuclear delivery vehicles or SNDVs, which the Soviet Union possessed on signing the Treaty in June 1979; and fourthly, concealment of the association of an ICBM and its launcher. In the other three cases the American conclusions are less categorical. These concern: First, the possible deployment of the SS16, and a probable violation only is alleged by the United States in this respect; secondly, the production rate of the Backfire bomber, and the United States noted that the evidence is ambiguous; and thirdly, the international operating capability of the Backfire bomber in respect of which the United States regarded some Soviet actions as inconsistent with a political commitment given by the Soviet Union on signing the Treaty. The centrepiece of the United States allegations in relation to SALT II are the issues of encryption of ballistic missile telemetry and the deployment of the SS25 ICBM. The United States has concluded that deployment of the SS25 violates the prohibition in the SALT II Treaty on each side flight-testing or deploying more than one new type of ICBM. The United States has advised the Soviet Union that the MX is its one new type of ICBM permitted under SALT II. According to United States sources the Soviet Union has in turn advised the United States that a new multiple-warhead ICBM it began flight testing in late 1982, which is designated the SS-X-24 by the United States, was its one permitted new type. Deployment of the SS24, which has not yet commenced, would not therefore be a violation of SALT II. I mention that specifically because I think the SS24 was mentioned by Senator Sir John Carrick in his question. Subsequently, in early 1983, the Soviet Union began flight testing another ICBM, designated the SS-X-25 by the United States. In response to United States queries the Soviet Union claimed that this ICBM is a permitted modification of an existing ICBM, the SS13, first deployed in 1969. The United States does not accept this assertion. It believes the throwweight of the SS25 exceeds by more than 5 per cent the throwweight of the SS13, and that it cannot therefore be a permitted modernisation of the SS13 as the Soviet Union claims. In a Press conference in Moscow on 23 May, the Chief of the Soviet General Staff, Marshal Akhromeyev, took issue with the way in which the United States had apparently arrived at its conclusions concerning the throwweight of the two missiles. The issue of whether the SS25 is a new ICBM as defined by the SALT II Treaty clearly involves complex technical and legal issues. The Government's view is that both the encryption issue and the SS25 raise legitimate questions concerning Soviet compliance with the relevant provisions of the SALT II Treaty. There is a case to answer and the Government hopes the Soviet Union will take appropriate steps to respond to Western concerns and demonstrate clearly its compliance with the relevant provisions of this important Treaty. This concern has been reflected in communications from the Australian Government to the Soviet Government over a protracted period. Mr Hayden has written to the Soviet Foreign Minister about it and more recently, as I have said, the Prime Minister (Mr Hawke) has written to General Secretary Gorbachev setting out Australian views on these questions. As to the last part of Senator Sir John Carrick's question, Parliament has been informed of some of the US allegations in answers to a number of questions on notice which appeared in the House of Representatives Hansard on 30 November 1985. I understand that answers to a subsequent series of questions on notice placed on the House of Representatives Notice Paper on 20 March also on this issue will appear in Hansard shortly. Finally Senator Sir John Carrick asked if the Prime Minister would be prepared to make public the texts of his recent communications to President Reagan and General Secretary Gorbachev on this important issue. I said that I would check whether this was possible. I have now been informed that, for familiar reasons going to the desirability of maintaining confidentiality in communications between heads of state, this will not be possible. But I am able to say that honourable senators can rest assured that the contents of those communications do fully reflect the concerns of the Australian Government, which I have outlined in answers to several questions on this matter in this chamber over the past week. Senator TEAGUE(South Australia)(3.16) —by leave-I move: That the Senate take note of the answers given by the Minister for Education (Senator Ryan) to questions without notice asked by Senators McKiernan and Teague this day relating to the accreditation of courses at the Canberra College of Advanced Education. Some controversy and dispute arose in respect of the answers given by the Minister for Education (Senator Ryan) to questions asked by Senator McKiernan and me today concerning the situation at the Canberra College of Advanced Education. Considerable concern has arisen at the College because of the confusion and disarray over the accreditation of the more than 100 courses offered by the College. Today's Canberra Times newspaper contains an article about the concern of sources within the College itself that the great majority of the courses are not accredited; that is to say, the courses are subject to periodic re-accreditation, and there are always some new courses. During Question Time this afternoon I contacted the College to confirm the position. It was indicated to me that the College continues to be concerned despite the assurances that the Minister sought to give to the Senate today that things were going to be improved. The Minister did not say what specific measures would be taken to improve the situation. However, she did claim responsibility for the administrative failure which has led to the present malaise at the College. I am concerned that, while the Minister said that there were some inaccuracies in some of the facts set out in today's newspaper report-that is, that 88 out of the 115 courses are awaiting approval-she did not answer a number of quite specific and significant questions. She did not agree to come back to the Senate and to be accountable and to give answers to these questions. She tried to bluster her way through by initially giving an inadequate answer. She did not say whether or not there were accreditation delays of greater than two years in respect of some courses. I have been informed within the last hour by the College that there is a delay of more than two years in the case of at least 11 courses. Some of the students who have been undertaking such courses have graduated. They have been given a diploma at graduation ceremonies with the undertaking that the wording and title of the diploma would need to be changed and that the correct title and correct course subject would be inserted after the course became accredited; that is, after it became lawful to issue such a diploma. I have never heard of such a state of affairs in Australia before in tertiary education institutions. It was proper for Senator Lewis to rise during Question Time to ask that the Minister's answer, which lacked information, be noted by the Senate. The Minister also did not answer whether or not other colleges of advanced education in Australia are suffering the same disarray. It is a matter of importance to the Senate that we ensure that Ministers of the Government are accountable to Parliament. Adequate answers ought to be given by the Minister in regard to bona fide questions that are of concern to us about the confusion that has led the administrators of a tertiary education institution to make statements which are publicly reported and which affect students. Instead of answering my question and reassuring the Senate that the requests of Dr Parfitt, the Principal of the Canberra College of Advanced Education, and Dr Overheu, the Co-Principal of the College, are being met, the Minister chose to bluster through an answer and did not address herself to that question at all. The Minister's only reference to Dr Parfitt-a most capable and achieving Principal of the college-was to give a veiled threat towards Dr Parfitt insofar as he may have been involved in this administrative scandal for which the Minister is responsible and which is now being revealed to the public and the Senate. I believe that the Senate cannot be treated in this way and that the Minister for Education should not feel that, just because she admits to the Senate in a brief answer to a dorothy dix question from one of her colleagues that she is the Minister responsible for this administrative failure, she should not go on to answer these specific questions and to give reassurances that steps are in train to fully meet these inadequacies. I therefore believe that it is right that the Senate takes note of Senator Ryan's answers in Question Time today, because they are manifestly inadequate. Finally, I refer to the needs of the students. The students of our tertiary education institutions should not be subjected to this kind of outcome from administrative failure. If there is to be a growing bureaucracy associated with the accreditation of tertiary courses, by all means let us make sure that it is workable and that courses are accredited within a 12-month period-surely that is achievable-so that the plight of students does not continue to be in the state of disarray in which it is now. It is the view of the Opposition that there needs to be considerable pruning of the bureaucracy associated with this kind of accreditation. I believe that, while all of us would want to ensure that courses which set out to offer some tertiary training are well accredited, that they offer what they allege to offer and that accreditation procedures are not just a matter of the Minister receiving a piece of paper and agreeing to it-that does not happen-it is manifestly not good for Australian tertiary education that there are delays of more than two years and that students are given diplomas that do not accurately describe the course in which they have graduated because of such administrative failure. The Senate, in taking note of the Minister's answers, rebukes the Minister and calls on the Minister to give full answers to all of the outstanding questions. Senator RYAN(Australian Capital Territory-Minister for Education)(3.23) —I feel I must make a brief response to some of these very outrageous and unfounded statements that Senator Teague has chosen to impart to the Senate this afternoon. The first thing I must say is that the answer I gave to Senator McKiernan's question was very full. It was not a short or inadequate answer, as Senator Teague is now claiming. If Senator Teague had paid attention to that answer, he would have heard me say-- Senator Teague —Let the Senate judge. Senator RYAN —He is not even listening now. It is very difficult to cope with an honourable senator who ignores information that is given, then gets to his feet and makes all kinds of crazy allegations. The first thing to be said is that there have been delays. The information provided by my Department is that substantially the delays have been at the Canberra College of Advanced Education end. I am not sure whether there have also been delays at the departmental end, but I am currently having that matter investigated. I would be surprised if the delays were only at the College end, but certainly the advice I gave in Question Time today was that considerable delays have been caused by the College failing to submit courses for accreditation. I explained to Senator Teague that the accreditation procedures for the Canberra College of Advanced Education are different from the procedures for other colleges in that the college may introduce courses and take students into them prior to receiving accreditation. That decision was made for the convenience of the College, but it is then up to the College to submit those courses for approval. There have been some areas where the College has not submitted those courses for a number of years. The extent to which the College's administrative inefficiency has contributed to the present problems is not fully established. Senator Teague —Are you blaming the college? Senator RYAN —I am saying that I have had advice that the College in a number of instances has failed to submit the courses for accreditation-one case was cited of three years after the College took students-and for those cases the College must bear full responsibility. There may be other cases of delay, about which I do not yet have information from my Department, which can be sheeted to the Commonwealth Institutions Accreditation Committee for Advanced Education, the function and composition of which I described at Question Time. Senator Teague —Do you undertake to get the answers? Senator RYAN —Of course I will get the answers and of course the matter is being further investigated. I do not think it advances the matter to have a matter of maladministration, for which the College is at least partly responsible, raised first of all in the columns of the Canberra Times-not always renowned for accuracy in these matters-and, secondly-- Senator Teague —What is inaccurate? Senator RYAN —I pointed out a number of statements. Senator Teague —Which ones? Senator RYAN —Again I simply point to the difficulty that arises for Ministers when factual information is given in answers to questions, then an honourable senator such as Senator Teague says: `Where are the inaccuracies?'. I instanced the inaccuracies in my answer to the Senate and that answer is now with Hansard because there was a demand that it be treated as a statement. There were inaccuracies in the claims about the number of courses that remain unaccredited and the claims about the failure to complete the accreditation processes. One of the most distressing features of this is that Senator Teague somehow suggested, in the comments he has just made, that I, my Department or a committee which has responsibility to report to me, is trying to short-cut accreditation procedures, whereas in fact the answer I gave at Question Time was to the contrary; that accreditation procedures must be carried out very thoroughly because employers and educational institutions place great value on the accreditation being thorough and accurate. Contrary to the suggestion that we are trying to short-circuit or undermine the accreditation procedures, we are actually trying to strengthen them. I said also in my answer at Question Time that there had been recent discussions between the Accreditation Committee and the college about improvements to the procedures. I do not have the details of what those improvements will be, but I will happily get those and set them out for the Senate. Again, that information is quite different from what Senator Teague was trying to claim when he said that there was no co-operation in respect of improving the procedures. Obviously there has been co-operation and there will continue to be. I simply conclude by saying that it is not in the interests of the College or the students of the College, if there is an administrative problem with regard to accreditation, that that matter is raised not by way of proper discussions with the Department, nor by way of direct representations to me-I am not aware of any direct representations coming to me on this matter-but by way of an article in the Canberra Times or by feeding an Opposition senator some criticism at Question Time. In conclusion, the matters that-- Senator Teague —The question was first raised by a Government senator. Senator McKiernan is worried about this and he is a Government senator. Senator RYAN —Senator McKiernan's question related to the article in the Canberra Times. Senator Teague is now claiming direct communication with the College as the basis for the comments he has just made. I am saying that it is in the interests of the College to pursue these matters properly; namely, by discussions with my Department, or, if those discussions are not satisfactory-I can think of no reason why they would not be satisfactory-by direct representation to me. I do not think that direct complaints to an Opposition senator to enable that honourable senator to grandstand on a matter such as this is the proper way to proceed. If I am being unkind in simply accepting what Senator Teague says is true and if there is some other explanation I will be very pleased to hear it from the College authorities. In conclusion-- Senator Teague —Mr Deputy President, on a point of order: The College did not complain to me. Following the asking of questions, I rang the College. The DEPUTY PRESIDENT —Order! That is not a point of order. That is a dispute over the facts. Senator RYAN —Senator Teague certainly gave the impression in the remarks he made that he had been the recipient of direct representations from the College. If that is not the case, I am pleased to have his correction on that matter. I repeat that that would not be the proper way for College authorities to proceed to have a difficulty investigated. There are proper pro- cedures and those procedures are always available to the College authorities to pursue. I hope from what Senator Teague has now said that they will pursue them. There is no doubt further information on the matter of the delays in accreditation. I have undertaken to have the matter investigated. In fact, I hope that as I speak my officers are doing just that, because I requested that they do so during Question Time. When the information is available I will be happy to make it available to the Senate. Question resolved in the affirmative. Senator Sir JOHN CARRICK(New South Wales)(3.31) —I move: That the Senate take note of the paper. In the short space of time-some five minutes-that one has to talk on such a subject, it is impossible adequately to deal with it. The subject-that of securing nuclear peace and, indeed, peace from conventional war-overrides all others. I draw the Senate's attention to the statement by the Minister for Foreign Affairs (Mr Hayden) because I want to refer to three or four points made by him. He stated: Australia reiterated its proposal, originally made by me-- that is, Mr Hayden-- to the Conference in August 1984, that consideration be given to protecting from attack those satellites which maintain international security and contribute to the verification of arms control agreements and the ground stations linked to such satellites. That is a very significant statement which, of course, relates to the attempt in Geneva to put together what is called an ASAT treaty-an anti-satellite treaty-and to get agreement throughout the world that those satellites which provide surveillance and basic guarantees against errors or basic war should be protected. Fundamental to that is the recognition that ground stations should also be protected. What is important is that this statement means that Nurrungar and Pine Gap, which are so vilified by so many for whatever reason, ought to be enshrined in and protected by world treaties. I repeat what the Minister said: . . . and the ground stations linked to such satellites. In other words, what the Minister is saying-and what I have said in the Senate previously-is that the best preventers of nuclear war or accidents are the verification satellites. The Conference on Disarmament is dealing with a treaty to ban the destruction of either those satellites or Pine Gap and Nurrungar. Fundamentally, therefore-and the Government has implied this-we have in central Australia some of the best international peacekeepers that one can have. Senator Sanders —That is absolute rubbish. Senator Sir JOHN CARRICK —That ought to be understood. The brain fever birds in the Australian Democrats who have been destructive this week are, of course, opposed to the ANZUS alliance and the Nuclear Non-Proliferation Treaty. They want isolationism in Australia. They want any strength from the Western alliance to leave Australia. Let them say that that is what they want. Senator Sanders —You are a good learner. Senator Sir JOHN CARRICK —Indeed, I would be very happy to keep saying to the Australian people what a danger to Australia, both in foreign affairs and economics, is posed by the Australian Democrats. They have proven how destructive they are by their attitude to the fringe benefits tax. They are now showing it in other ways. The Minister in his statement also said: On 15 January Mr Gorbachev put forward a comprehensive set of proposals, the centre-piece of which was a call for the elimination, in three stages, of all nuclear weapons by the year 2000. I applaud that, but what I do not understand is why this statement does not refer to the prior offer by the United States to have exactly the same removal of all nuclear weapons by the year 2000 on a three-stage basis. The same thing occurs when we mention chemical weapons and the laudable act of seeking to get a treaty to ban chemical weapons. There is no mention of the fact that for the past 20 years the Russians have been building up a stockpile of chemical and biological weapons, deploying those weapons and training their troops, while since 1970 the Americans have done nothing of the kind. It is a pity that what is on the face of it a good report and a good speech, ought to be unbalanced in those areas. I know of no place which is more important than the Conference on Disarmament in Geneva, which I have attended, to look towards the issues of peace. I know of no place where the dialogue for peace is more important. I commend all of the 40 delegates from both sides of the Iron Curtain who take part at the Conference. I wish them well. Senator MASON(New South Wales)(3.36) —With all respect to Senator Sir John Carrick, I do not think we should make the error of the emperor's clothes with regard to this report of the Australian Delegation to the 1985 Session of the Conference on Disarmament. This report, when one reads it carefully-I take it that Senator Sir John Carrick has not done that-is a most painful document and a record of most terrible frustration. This is instanced very early in the report when it states: The Conference achieved some substantive progress on a few of its agenda items during the 1985 session but the gains were limited. As was the case last year, it was not possible to reconcile the differences of approach to the important nuclear items-nuclear test ban and prevention of nuclear war-to allow work on them to be got underway. This situation was again a cause of deep frustration for the majority of members of the Conference. It reflected the extent to which the Conference remained subservient to the interests and state of relations between the United States and the Soviet Union. Page 7 of the report reads: While there was broad support within the Conference for the program of work advocated by the Western Group, the attitude of some key members of the Non-Aligned Group and the Socialist Group, who remained opposed to any solution which did not have a commitment to negotiation of a treaty as its central element, prevented adoption of the program. Under the heading `Nuclear Test Ban', the report states: . . . no substantive work was undertaken on this item this year. The heading on page 13 is `Cessation of the Nuclear Arms Race and Nuclear Disarmament'. After all, this is what the Conference is all about. It reads: As in 1984, no agreement was reached on establishing a subsidiary body of the Conference to consider this item. Page 15 is entitled `Prevention of Nuclear War'. It reads: The differences of view between the Groups once again resulted in a stalemate and prevented any structured consideration being given to this subject. I do not in any way derogate from the efforts of Ambassador Butler and our people, who do what they can in this regard. They are trying to work in an almost impossible environment. I found that this was the case when I was present for a time at the Disarmament Session of the United Nations General Assembly in New York two or three years ago. I was struck then by two things: The proliferation of worthy statements about the issue of nuclear disarmament and, by contrast, the absolute failure of the session to do anything practical about it. This report confirms that view. If the world is to escape the horrors of nuclear war, it will not be done because of the efforts of government. The United States abandonment of the SALT Treaty and the Russians' part in that is a further ominous portent for the future. If an effective disarmament effort is to be achieved, it will be by the efforts of individual human beings-a massive grass roots movement which will influence governments sufficiently. Such movements, of course, already exist, and I commend them. Many of them recently have come under considerable criticism. There have actually been objections in this country and others to the idea of teaching peace studies in schools. Presumably those who take that view want an uninformed and compliant new generation of cannon fodder to deposit in any even more destructive war. I cannot heap sufficient contempt on those people who put that point of view and who have made peace a dirty word. What greater crime against humanity could any- body commit than that? It is vital that young people should have the knowledge to make up their own minds on the risks that confront their generation. That is a unique danger not faced by any other human beings who have come before us. There is need for deep understanding of the basic reasons for aggression in human beings and the risk that nuclear war could bring. There is no doubt that the Chernobyl disaster has contributed to this and I am interested that the dreadful consequences of that event appear only to have increased the resolve of those evil people who would try to diminish the cause of peace and diminish the understanding of these matters. Most people are not so stupid as to miss the connection between nuclear bombs and nuclear reactors. The deadly radiation that kills, maims and deforms is exactly the same. We all know that few, if any, of those exposed to heavy radiation at Chernobyl will survive. Indeed, it has been reported from Russia already that attempts at bone marrow transplants there have failed. There is no medical answer to high radiation doses and for hundreds of millions of people there would be no chance whatsoever of recovery from the consequences of nuclear war. I commend this report. The one thing I would not commend is the failure of support in the community, especially at the level of ordinary people, for the cause of peace and I utterly renounce and condemn the actions of those who attempt to make peace a dirty word. Senator TEAGUE(South Australia)(3.42) —Honourable senators who preceded me in noting this report of the Australian delegation to the 1985 session of the Conference on Disarmament have spoken on behalf of us all insofar as they have pledged support to every effort that can be taken by Australia to achieve multilateral disarmament and peace for the world. The disarmament conference is an important procedure, open to us, which works towards those ends. The Minister for Foreign Affairs (Mr Hayden) in his statement accompanying the delegation's report on last year's conference has been rather overoptimistic about the way in which the conference, and our contribution to it, can lead to the desired outcomes. This is a most complex area and it is fraught with enormous difficulty, especially given the state of relations between the United States and the Soviet Union. However expert those members of the conference and our delegation led by Ambassador Butler may be, there is a danger in taking too literally any overoptimism that all these problems will be quickly solved. The optimism is confined at the moment to the areas of chemical weapons, radiological weapons and some movement towards at least an in-principle agreement by the nuclear nations on a nuclear test ban that is comprehensive. Even though these are good signs and should be welcomed and even though there was progress in 1985 in dealing with all the matters on the agenda, the really difficult questions concern the deployment of nuclear weapons, especially between the two super-powers over each other's territory and the so-called intermediate nuclear weapons in the European theatre. Looking from the perspective of Canberra, progress towards real gains in this area has not just been too slow; it has been non-existent. From our various points of analysis we find various reasons for that. However much we may hope that there will be progress let us mark the 1985-86 years without any ambiguity and without being too overoptimistic about making some progress. There are still more than 10,000 warheads on each side. It still takes half an hour for intercontinental ballistic missiles to move from a super-power aggressor to the enemy's territory. It would take half an hour for the response to get back. Those times would overlap and within the space of an hour there would be vast destruction of the northern hemisphere which would result in consequences for the whole world. There has not been progress towards disarmament. We must lament that and renew our efforts by supporting any positive measures that the Australian Government and Ambassador Butler may take in concert with other like-minded nations-indeed, in concert with our ally the United States-to achieve that agenda. In the report before us I see some useful progress and even the hope that chemical weapons may be banned within the next few years; that is, destroyed by all those who retain such weapons. I am also hopeful that there will be destruction of all radiological weapons and that there might even be an agreement that no nuclear electricity generating plant will be targeted by any of the silos of weapons on each side. There are important gains, but not gains in the area of greatest importance and priority. It is in the area of genuine disarmament-real cuts-that we must press for multilateral disarmament, not unilateralism or an act on one side alone. We want to see progress which leads to and wins disarmament from both super-powers alike and indeed, from the other three nuclear nations-France, the United Kingdom and China. We must press for that disarmament to be verifiable. It is no good having words on pieces of paper; we must have an action line. I share the disappointment that has been expressed by United States leaders that too often the bits of paper are not parallel with any action. It is in these areas that we look for real and significant cuts so that multilateral and verifiable disarmament is achieved. Senator COOK(Western Australia)(3.47) —These papers deal with the most fundamental issue of our time, an issue that is transcended by no other-the issue of nuclear disarmament. Since this Government came to power it has been trying to push the super-powers into a position in which we can look at meaningful achievements in nuclear disarmament. We apologise to no-one for that. The fact that these papers reflect some frustration, as Senator Mason pointed out, signifies that we have been working hard and we are not trailing along behind the pack; we are out there in front trying to create real change. We pursue that goal based on what we understand to be a clear mandate for the Australian Labor Party resulting from widespread community idealism for nuclear disarmament. In the tabling speech of the Minister for Foreign Affairs (Mr Hayden) he referred to a statement by Mr Olof Palme, the late and unfortunately assassinated Prime Minister of Sweden, who said in this context that the `non-nuclears' must have a say; that is, countries like Australia which are not nuclear powers and countries in the unaligned group which are not nuclear powers must have a say in international fora to the super-powers about their agenda for nuclear disarmament. Australia has pursued those ambitions and its agenda through the appointment of an Ambassador for Disarmament, Richard Butler, through pursuit of a comprehensive test ban treaty, through the nuclear non-proliferation treaty review conference last year and the consolidation and further development of that treaty, and through its success in achieving a South Pacific nuclear free zone. This success was underlined recently when the Prime Minister (Mr Hawke) visited China and secured approval from that country that it too would support that initiative in the South Pacific. Those are all positive and necessary moves that a government committed to nuclear disarmament must, and should take. I believe that our Prime Minister and in particular our Minister for Foreign Affairs are to be commended for their initiatives. Of course there are always people who will say that we have not gone far enough, just as there are people who will say that we have gone too far. We do not apologise for addressing, in a step by step orderly program, what we as a middle power under the umbrella of the Western alliance can do. As a middle power, we cannot vault a tall building in a single bound and achieve, because Australia wishes it, a nuclear disarmament regime across the world. We do not have that capability. We can use our influence and we can work hard, and that is what we are doing. I believe that is a proper use of our effort and of our lobbying power. If it be frustrating, it is because we are trying and we are working to push for much more rapid change. Soon this Government will introduce legislation which will be aimed at outlawing the manufacture, production and acquisition of nuclear weapons in this country; research and development relating to the manufacture or production of nuclear weapons, possession and control of nuclear weapons; the stationing of nuclear weapons in Australia; and the testing of nuclear weapons. The Government will also introduce legislation which will make it an offence to do any act which facilitates the manufacture, production, acquisition or testing of nuclear weapons in this country. That will apply not only within the national borders of Australia but also, in certain circumstances, in areas beyond our national borders. I believe that when this legislation is brought forward it will be widely supported. I hope it will be unanimously supported by both Houses. Again, it will be another significant step forward by this Government in trying to address the community's concern about nuclear disarmament that is rightly expressed in this country as well as doing something to consolidate the South West Pacific Nuclear Free Zone Treaty in legislation in this country and to meet the objectives that we have been pursuing internationally as well. To a large extent, Australia has been one of the pioneers of a comprehensive test ban treaty. It is the centrepiece of our move on the world stage in this area. It is a treaty on which we sought to make progress at the Geneva talks. It is a treaty with which we have not got as far as we would like. Certainly, through the Ambassador for Disarmament, it is an issue with which we will continue to persist in all proper forums around the world. It is not something that we will give up. Australia has indicated that it is prepared to make its seismic surveying facilities available to the world in order that such a treaty can be properly policed. We hope that we will succeed as quickly as possible, and it will not be for want of trying if we do not succeed. I believe our role internationally is a role about which we as a country can say: `Here is a government trying on the world stage and domestically to achieve a situation in which the people of this country and the world can look forward to a time in which nuclear disarmament does occur and people will be able to look back and say that the Australian Government helped achieve that aim'. Senator SANDERS(Tasmania)(3.52) —The report of the Australian delegation to the 1985 session of the Conference on Disarmament shows once again that we are stuck on dead centre when it comes to disarmament. Page 8 of the report states: However, generally the United States continued to adopt a cautious approach to the consideration of items on the Conference's agenda, and, in particular, had strong reservations about discussions of the subject of Prevention of Nuclear War and All Related Matters. The next paragraph states: The Soviet Union and its allies again adopted the approach at the outset of the Session of calling for negotiating mandates on all agenda items. They repeatedly admonished the Western group of countries during the Session for their inability to accept such mandates. It is obvious that what we need is a strong approach to disarmament. Australia could exert that strong approach. It has not done so. In spite of the Bill which Senator Cook has told us about, which is in fact the Australian Democrats Bill which the Australian Labor Party rejected in an earlier sitting of the Senate, Australia is not well known amongst the world's nations in the nuclear disarmament field, unlike New Zealand, which, of course, is well known. If Australia were to take the stand that New Zealand has taken in banning nuclear-armed and nuclear-powered ships, perhaps we would have a voice. Perhaps then we could get this whole issue off dead centre. Most recently, President Reagan announced that it is his intention to abandon SALT II, the agreement which limits nuclear weapons. This has caused an outcry around the world. One would think that if in fact Australia were interested in disarmament it would have joined the outcry. On 29 May 1986, in this chamber, Senator Coleman asked Senator Gareth Evans, the Minister representing the Minister for Foreign Affairs, whether the Government would express its complete rejection of that unilateral action by the Unites States. Senator Evans replied: The situation demands close and careful analysis, which the Government is undertaking as a matter of urgency. At the same time that the Government was taking close and careful analysis the North Atlantic Treaty Organisation nations had shown their complete dismay that America would break SALT II. In fact, they had communicated in the strongest terms with the United States Government. While the Australian Government was considering the issues, the United States Congress was up in arms. I refer to an article in the Age of 2 June 1986, which states: Washington, 1 June-President Reagan's apparent decision to abandon the Strategic Arms Limitation Treaty is expected to provoke an uproar in Congress this week. . . . . Aides for several senators, both Republicans and Democrats, were drafting a binding resolution that would require continuing United States compliance with Salt 2. Yet in Australia we were considering the issue. The next day I asked Senator Gareth Evans whether the Australian Government would take immediate steps to inform the American Government of our concern and, furthermore, I asked, since SALT II was the underpinning for the Nuclear Non-Proliferation Treaty, whether we would consider withdrawing from that Treaty if SALT II were abandoned. We got the usual invective from Senator Gareth Evans. He said: `We feel it is important, but we are still looking at it'. He said: The nature of the Australian Government's response-a constructive response, it will be hoped-is being very actively considered by the Government at the moment. But the Nuclear Non-Proliferation Treaty has been perhaps the only but certainly the most conspicuously successful of the arms control agreements. The Americans do not agree. Senator Dale Bumpers said: Salt 2 is the only treaty, ratified or unratified that keeps the nuclear arms race under control. The Nuclear Non-Proliferation Treaty has not stopped the proliferation of nuclear weapons. South Africa, Israel and India now have the bomb. Pakistan will have it shortly. None of these are Nuclear Non-Proliferation Treaty members. Members who are in the nuclear club who are members of the Nuclear Non-Proliferation Treaty are exempt from any consideration. It seems that all that Treaty means to us and to this Government is an excuse to sell uranium. We have been told over and over in this chamber that under the Nuclear Non-Proliferation Treaty we have the moral obligation to sell uranium. If the Treaty does not work as a treaty to prevent nuclear arms and if it works only as a justification for selling uranium, Australia should abandon it. We should take the high moral ground of abandoning the sale of uranium and thus abandoning our support of any nuclear warfare. Senator VALLENTINE(Western Australia)(3.57) —In welcoming the tabling of the report of the Australian delegation to the 1985 session of the Conference on Disarmament in Geneva and the text of a statement by the Minister for Foreign Affairs (Mr Hayden), it is important to state that the work of the Conference on Disarmament in Geneva must go on, but that on its own it is not enough to achieve nuclear disarmament, as we have seen. The first statement, in most of the eight sections which were dealt with by the Conference on Disarmament, blandly admits that no substantive work was done in 1985, which I think is a damning indictment of the pace at which things work at the diplomatic level. However, these diplomatic efforts are important. But the people at the grass roots level are tired of the rhetoric; they are tired of words, and they want action. I am one of those people to whom Senator Cook referred earlier when he said that while people have welcomed to a certain extent the Government initiatives that have been made in this country, they do not go far enough. In particular, he mentioned the South Pacific nuclear free zone, which allows more nuclear activity than it bans. It allows 12 out of the 20 categories of possible nuclear activity in this region. Of course it does not go far enough, but it is an important first stage. Similarly, the anti-nuclear legislation which is to be introduced tomorrow in the House of Representatives by the Foreign Minister, will disallow any future activities with nuclear weapons and the permanent stationing of nuclear weapons on Australian soil. They are not here now-at least that is the commonly held belief. Of course, we cannot be quite sure because we do not know exactly what goes on at Pine Gap. However, that legislation will not change anything at all with regard to the ways in which Australia is currently involved in the nuclear arms race. While those initiatives are welcomed, it is important to say that they just do not go far enough. Every effort that is made by the Australian Government carefully sidesteps offending our great friend and ally, the United States of America. The good efforts that are made in Geneva, on the comprehensive test ban treaty in particular, are constantly stymied at every turn by the United States Government's intransigence, especially on the issue of working towards a negotiating mandate on a comprehensive test ban. I want to refer to Mr Hayden's tabling statement-one statement which he made which I cannot let go unchallenged. I cannot believe the statement that the Foreign Minister made when he said that the Soviet Union's temporary moratorium on nuclear testing was welcomed by Australia. After asking repeated questions in this place I got an answer from the Minister for Resources and Energy (Senator Gareth Evans), who represents the Minister for Foreign Affairs, that the Australian Government did not view this initiative seriously; that the Australian Government was more concerned about working on a comprehensive test ban and that a moratorium was not a replacement for a comprehensive test ban. We were not suggesting that it was a replacement but that it was a jolly good first step and that it was an initiative that should not have been ignored. When the Ambassador for Disarmament was speaking to the parliamentary disarmament group about this question, he said that the Soviet moratorium was a unilateral, empty gesture and we would not waste our time on it. Now that was said by the Ambassador for Disarmament, so how Mr Hayden has the gall to get up and say that the Soviet Union's temporary moratorium on nuclear testing was welcomed by Australia, I do not know. I do not think it was welcomed at all, it was absolutely ignored, as it was by our great friend and ally, the United States of America. Looking at the report itself we see on page 8 that the Soviet Union and the neutral and non-aligned countries continue to press, as in previous years, for negotiations on all items on the conference's agenda, whereas we see that the United States was opposed to any mandate calling for negotiation of a treaty. It regards the CTB as a long term objective and not something which should be negotiated at present. Therefore, the western group was not able to agree to such a mandate. The DEPUTY PRESIDENT —Order! The time allotted for 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 SHEIL(Queensland) —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 Sir JOHN CARRICK(New South Wales) —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 Sir JOHN CARRICK —(New South Wales)-by leave-I move: That the Senate take note of the papers. I seek leave to continue my remarks later. Leave granted; debate adjourned. Senator Vigor —Mr Deputy President, will these reports be listed as business for the next day of General Business, whenever that is? The DEPUTY PRESIDENT —They will be on the Notice Paper for the next day of sitting. There is no further General Business for this sitting period. Senator Vigor —They will go over to the Budget session? The DEPUTY PRESIDENT —They will be on the Notice Paper for the Budget Session. Senator Vigor —Could I move that they be taken on the next day of General Business in the Budget session? The DEPUTY PRESIDENT —If the honourable senator wishes to bring them up on the day of General Business he may move a motion at that time to do so in order for them to be brought forward on that day. But they will remain on the Notice Paper. Debate resumed from 30 May, on motion by Senator McIntosh: That the Senate take note of the paper. Senator McINTOSH(Western Australia)(4.04) —In the intervening time the Dibb Review of Australia's Defence Capabilities has been tabled, to my advantage to some degree, because a number of points made in the Dibb Review lend support to the Committee's position on Army land acquisition. Dibb recommended, for example, the shifting of more regular forces to northern Australia and he also recommended giving no priority to mechanised forces; reducing the number of tanks in service and putting some of those into reserve; and reducing the role of medium artillery; that is, 155mm guns. All these recommendations reduce the need for a large manoeuvre area by reducing the number of regular forces in south-eastern Australia and reducing the priority for armoured-mechanised forces and medium artillery. Dibb also recommended more light, air mobile, operational deployment type forces which would not require a Cobar manoeuvre area on which to train. The Committee recommended against the use of the Cobar area. No priority is to be given to ground attack aircraft and helicopters. The Royal Australian Air Force requirement for Cobar included the need to exercise such aircraft. Dibb also recommended a program of sustained exercises in northern Australia which would include deployment of reservists from southern Australia. Given the limited time and resources of the Army Reserve, any increase in training in the north will result in a reduced training requirement in the south. Again, the Committee did not agree that the centre of gravity was in the south. At the very least, the contents of the Dibb report support the Committee's conclusion that any further consideration of the requirements for a manoeuvre area in south-eastern Australia should be deferred until policy decisions which may flow from the Dibb report have been implemented. This is to be found on page 17 of the report. Further, it should be argued that if consideration of the manoeuvre proposal is to be deferred further consideration of Cobar should be ruled out in the interests of removing the blight on the area. I conclude by saying that we are looking forward to seeing the land acquisition Bill to find out whether it covers injurious effects or blight. Senator Sir JOHN CARRICK(New South Wales)(4.06) —The Senate is debating the Senate Standing Committee on Foreign Affairs and Defence report on Land Acquisition in New South Wales by the Army. The Committee was formed because the Department of Defence and the Australian Army indicated last year that they were seeking two pieces of land, one to collocate a school of artillery and a school of infantry and the other for a major manoeuvre area. To get some idea of the dimensions, the original idea was for the collocated schools to occupy 160,000 hectares of land and the other area was to occupy some two million hectares of land. When the two areas were named there was, as one would expect, a large public outcry. Other areas had been named before but specifically Bathurst-Orange was named for the schools and Cobar was named for the manoeuvre area. One hundred-odd farming families with farming properties protested vigorously, as did many others in Cobar. When examining the defence estimates last year honourable senators asked a series of questions and, in their view, they got unsatisfactory answers. As a result this Committee was formed. Let me say that the Committee was unanimous in its report which is before the Senate. The Committee first of all went to Singleton where there exists an infantry training school. Singleton was given a user requirement for an infantry training school. That user requirement specified that the infantry training school would be for those coming out of Kapooka, having just been recruited, who would be doing their initial infantry training. One of the main requirements was that the climate should be such, both day and night, that, for at least ten months of the year, numbers of soldiers could use that area to do their outdoor training. Another requirement was that the area itself should be basically rolling, undulating, easy and lightly treed country so that these soldiers could do their initial training. Indeed, this was a perfect description of the army camp that we were in at Singleton. I should interpolate that the Committee subsequently heard evidence from past commandants of that infantry training school, some of whom had done reconnaissance work in the Bathurst-Orange area, who were emphatic that the Singleton base ought not be changed and that the alternative was not suitable in any way. When we faced up to the artillery school we were told that there would need to be a massive impact area for the artillery to shoot upon and that it had to have particular environmental characteristics. Of course, when we looked at Bathurst-Orange we realised that, with all the compromise in the world, we could not fit the user requirement to a climate and a landscape that could not be more different from that described at Singleton. Bathurst-Orange, with its extremes of climate in autumn and winter and with its fogs and rough terrain, was completely out of the question in justifying the user requirement. Originally an area of 160,000 hectares was envisaged and that was cut down to 70,000 hectares. The environmental impact study done by Dames and Moore said that the only impact area for artillery existed outside the 70,000 hectares. In other words, choice of the area would be wrong because it could not have an impact area. When the Committee saw the map showing the impact area covering the smaller area, we found it straddled the Macquarie River. We found that use of the area would deny to the people of Australia 30 kilometres of the Macquarie River and that the impact area would have artillery shells bursting on top of hills and pushing debris down into a river which was to flow into the Burrendong Dam. Time after time everything that we saw was totally against the use of Bathurst-Orange. Why was Bathurst-Orange ever dreamed of? The suggestion was that the New South Wales Government offered it because a proposed growth centre there had failed and was in debt to approximately $90m and this was some kind of an adjustment to suit politically. In any case there could not have been a more unsuitable area altogether, apart from the damage to some 100 families that have farmed there for centuries. Indeed, in the end the Government saw the impossibility of the situation and withdrew Bathurst-Orange. We decided that the infantry training centre should stay at Singleton, where upgraded facilities would make it quite suitable. On the question of artillery, there is a school at North Head at present. There is an agreement between the New South Wales and Commonwealth governments that it should be ultimately removed from North Head. A tentative date of the 1990 vintage is there, but that could be renegotiated. In any case, there are other areas to look at-Puckapunyal and elsewhere-and, depending upon the Dibb report, perhaps areas outside this State. The manoeuvre area presented an impossible situation because the user requirement, as we were told, was for an armoured corps usage; that is, that some 3,000 troops with Leopard tanks and all the accoutrements of an armoured corps would move over this area in massive waves-digging holes, living there, cutting down fences and moving through the place. Yet here was a western land division which was created in order to preserve the area because it is so fragile. The very fragility of the area simply precludes the movement of large numbers of troops or large numbers of mechanised forces. The more ridiculous situation is the one to which the Chairman of the Committee, Senator McIntosh, has drawn our attention. Here was an attempt at establishing a manoeuvre area in a place which in no way could fit any kind of environment, in which the troops were likely to be deployed in action, an area where there might be a threat. If there was to be a threat-Dibb has indicated northern Australia-one would need the higher rainfall, higher treed, more grassy lands in northern Australia, the sub-tropical and tropical climates, instead of this incredible area that was chosen. We damaged the ecology with our ordinary vehicles. Topsoil of about nine inches would really be something around here, whereas there one could take a spade and push it into 17 feet of material that was really bulldust. We realised what an enormous and incongruous situation it was that this area should ever have been allowed to come under consideration. The report was very critical of the Department of Defence for the method by which it approached us, for its failure to be forthcoming in evidence, and for the failure to disclose evidence which was vital to us and which had to be secured by freedom of information. Above all, the Prime Minister (Mr Hawke) had written to people in both areas and said that there would not be compulsory acquisition or forced dispossession of land. That would have been vital. Our Committee could have finished because nobody there was going to give voluntary possession. Over the months we could not get an answer from the Department of Defence as to whether that was the continued stated policy. So we were frustrated all the time. The Dibb report has made it abundantly clear that Cobar is the wrong place in every measure. The corps brigade movements are nonsense in training. The Government should now get out of Cobar and release the people from their bondage. They cannot sell or move at this moment; they are under a blight of forced dispossession. The fact is that the Prime Minister has said there will be no compulsory acquisitions. I take it that that is Government policy. If that is so, we should abandon Cobar today. Senator HAMER(Victoria)(4.15) —The Senate Standing Committee on Foreign Affairs and Defence was considering two really quite independent proposals for the acquisition of land by the Army. The first was to set up a combined infantry and artillery school in the Bathurst-Orange area, an area in which, as Senator Sir John Carrick has said, it was asking for 73,000 hectares. But a quite separate requirement from the Army for land was for a new manoeuvre area. It had its eye on the western division of New South Wales and Dubbo. That was to allow one brigade to exercise. One brigade has armour, mobile infantry, artillery and combat engineers and, for training at brigade scale exercises, the Army was looking at one million hectares, a very large area indeed. In considering these proposals the Committee really had to look at four hurdles these proposals had to get over before they could be justified. The first was whether a case for the need, which was strategic in the case of the manoeuvre area and training in the case of the combined school of infantry and artillery, had been made out. Secondly, if the case had been made out, were the requirements fairly stated? Thirdly, did the proposed sites meet the user requirements? Finally, and quite separately, were the land acquisition processes fair and reasonable? I will deal with the land acquisition processes first. The Committee decided to defer this because the Commonwealth is making major amendments to the Commonwealth Lands Acquisition Act. It is appropriate that we should look at those amendments to the new Act when it is in force. The whole situation of acquisition was totally confused by the promises made by the Prime Minister (Mr Hawke)-admittedly, I think, in terms of an impending election; nevertheless he made promises which were stated publicly and were widely known in the area-that the Government had no intention of compulsorily acquiring productive land for Department of Defence proposals; secondly, that the Government had no intention of forcibly dispossessing people; and, finally, that the decision should be made very quickly, and this was in June 1984, regarding Defence Department requirements. We had a great deal of difficulty finding out whether the Prime Minister meant what he said and whether the promises still held. We had the impression that these, like many other promises made by Mr Hawke, were rather disposable promises. Nevertheless, they were apparently in force as government policy and we could not get a clear answer out of the Defence Department as to whether they were still in force. If they were in force, neither of the two proposals was remotely feasible. Both of them involved compulsory acquisition in the Bathurst-Orange area or forcible dispossession by taking over the leases in the Dubbo area. We could not get a sensible answer from the Department of the Prime Minister and Cabinet or from the Department of Defence on whether this very clear promise made by the Prime Minister still stood. That subject of the acquisition processes has been deferred by the Committee, which will have another look at it when the revised Act has been produced. I would like to look at the other criteria enumerated-first, the manoeuvre area, the one million hectares in the Dubbo area. I felt-I am sure the other members of the Committee felt the same-that the Defence Department made out no credible case on the need for such an area. Senator Sir John Carrick has dealt in some detail with that. I will not repeat it except to say that the Dibb Review of Australia's Defence Capabilities, which would appear likely to be government policy, confirms our feeling that the case for the requirement of such a large, mechanised training area for tanks and armoured personnel carriers, mobile infantry and so on has not been made out. Even if such an area were required it would seem most unlikely, indeed impossible, that the Dubbo area would be suitable. We want an area that is not so ecologically fragile and is much closer to the type of terrain on which this brigade, if ever it were deployed, would be fighting. On both counts Dubbo failed. A point that made me curious when we were discussing this matter with the Defence Department was that the Department rather shifted ground on why the training area should be located there and made a great deal of the need for training the Army Reserve. In the user requirement, the requirement for Reserve training is barely mentioned. However, when we came to pin the Defence Department down why it was necessary to have it in that area and why the Department should pick an area that was so unsuitable, that was ecologically unsound and was nothing like the terrain over which there might be fighting, the main argument was that it was convenient for the Reserve for its short period of training. That may be so, but the user requirement did not fairly reflect what the Army later said it wanted. As for the question whether the area met the user requirement, quite clearly it did not meet the requirement-even as stated. It was a most unsuitable area from every point of view. It was ecologically unsuitable. It was not credible as a suitable training area for the terrain on which there might be fighting. I think the Department made no case. I think it has to go back and think through again exactly what it wants. I think there will be a great deal of re-examination and new proposals coming forward. I very much doubt whether it could make a case for that area at all. I think we should strike that area off. The need for a new combined artillery and infantry training school really arises from the agreement that the Army School of Artillery at North Head in Sydney should move out. I think that is proper, but I would like to point out that, if we look at Australia's two biggest cities, Sydney and Melbourne, we see that the areas that have been preserved best are the ones that are in the hands of the Defence Department. If we look around Sydney Harbour we will see that the only large areas that have been preserved are the old Defence reserves-North Head, South Head and Middle Head. I am not saying that all the defence areas have been preserved, but without defence preservation Sydney Harbour would be a much poorer place. I do not think we should be in any rush to move the Army at great inconvenience out of North Head. I think the Army would probably preserve it very much better than the New South Wales Government would. I think eventually the School of Artillery will have to go, but the issue really is in regard to the argument for moving the infantry school from Singleton, which everyone regards as an admirable site for infantry training, at great expense into the new collocated school. We found no arguments for it. We would like to see a new and separate requirement for a school of artillery. No good arguments have been produced for combining it at great expense with the infantry school. Secondly, we thought that the range and schools areas were very much larger than were really needed. The Department really was considering what it would need in extreme circumstances rather than what was adequate for training in a much smaller area. We thought that priority should be given to locating this school wholly on existing Army facilities-Puckapunyal is a possibility-or other Commonwealth land. We did not think that the examination of the sites for this new school of artillery should be confined to New South Wales. In the view of the Committee, both proposals failed. We thought that a case had not been made out in regard to the first point, that the case for the user requirement was not an accurate one, and that the sites selected were not themselves suitable. I would like just to say something about the attitude of the Department of Defence. We found a great deal of difficulty getting information out of that Department. It seemed to conceal things that should properly have been put before the Committee. We know-it is fairly obvious-that there is a deep division between the Defence Department and the Army over the desirability of these training areas. The Department of Defence did not present a good case. It was not entirely frank with the Committee. A great deal of very relevant information was found by way of freedom of information requests rather than, as should have been the case, it being given to the Committee by the Defence Department. Finally, I would like to say that this investigation and its results are an example of the importance of our Senate committees. If this Government controlled the Senate or if there were no Senate committees, that proposal would have gone through. It was only because of the possibility of public examination of the issues and the resulting revelation of the mistakes, inconsistencies and inadequacies of the proposals that we stopped what would have been a major error made by this Government. That is to the credit of the Senate and its committee system. Senator MASON(New South Wales)(4.26) —I would like, first, to support Senator Sir John Carrick's request to the Minister for Defence (Mr Beazley) to make an announcement immediately that the Army will get out of Cobar. In the light of the report of the Senate Standing Committee on Foreign Affairs and Defence there is no excuse whatsoever for continued shilly-shallying by the Army over this matter. The landholders in that area have every right to be put out of the misery to which they have been exposed for so long. I would also like to support what Senator Hamer said about the necessity for this investigation and to recall that at the time I sought reference of this matter to the Foreign Affairs and Defence Committee it was utterly opposed by the Government. I was supported, as I recall, by all other Opposition senators from New South Wales. I think that is an almost unprecedented occurrence. I commend those honourable senators for their excellent judgment. Also I commend the Committee for its deliberations. Obviously Committee members have taken a great deal of time and trouble to unravel a very lengthy and tangled skein in the teeth of considerable opposition by the Department of Defence. That section of the introduction to the First Report on Land Acquisition in New South Wales by the Australian Army which deals with the conduct of the Department of Defence makes very interesting and informative reading. It is obvious that members of the Committee had to use much torturous and convoluted questioning to obtain facts which they could use in their conclusions. Indeed, it is a tribute to them that in the end they did uncover all this information from a department which appears to have been influenced by the television series Yes Minister. This is a serious matter because it is intolerable that the large intrusions on public cost which this matter has caused over the years should be simply accepted and blinked away. It is not good enough for officials and for a government department such as the Defence Department to come forward with matters which in fact are not true and which are proven not to be justified and for them not to expect an examination of the enormous cost which they have caused the community and the taxpayer. I think that that is something that has to be borne in mind. As I said when I proposed this reference to the Committee, I have seldom seen a better example of the saying `Kanson mimpi'-I am sure Senator Sir John Carrick will know that it is a Japanese Tokugawa samurai saying-which means `officially exalted people despised'. This extraordinary departmental evasiveness, double-talk and official shiftiness has been going on for a decade. It is very interesting to note that without the provisions of the Freedom of Information Act it might well still be going on, because the Committee found under that Act information that directly contradicted evidence given by departmental officers. That is a serious indictment of that Department. There are important lessons in this matter for the future. Every time that the Army has favoured a locality with doubtful intentions it has had catastrophic effects on the people of that region. Land values have plummeted. Persons facing the need to sell for urgent and personal reasons have not been able to sell and farmers have seen little point in developing their properties by making constructive improvements. All these things are not good for the economy or for Australia. This especially applies in the Orange-Bathurst area where the land proposed to be acquired is a first-class fine wool area. This is a time when there is a very ready market for fine and super-fine wool. It is a time when we need every cent of export income we can get. This matter goes back 12 years ago to 1974 when the Army decided to acquire 200,000 hectares at Colo-Putty for relocation of the artillery and infantry schools and for a manoeuvres area. The matter dragged on until 1977 when the Army chose Dubbo as a favoured site for the new training facilities and Cobar as a favoured site for manoeuvres. There was a further hiatus, a very leisurely one-only five years that time-until February 1982 when Mr Killen, the then Minister for Defence, and the New South Wales Premier, Mr Wran, ordered further studies of the Dubbo and Cobar areas. But then New South Wales government departments suggested other areas, including Parkes, Forbes, Wellington, Broken Hill and, for the first time, Orange-Bathurst as possible schools areas. The manoeuvres area requirement, it is important to recall, was no less than 2 million hectares-rather more than the 200,000 hectares suggested in 1974 and considerably larger than some major European countries. That was the Army's initial requirement. Yet it was a serious proposition put forward seriously by the Army and the Government at that time. At that stage, landholders in all those areas naturally became agitated and their position became insecure. The value of their property was immediately affected. In 1982, the Federal-State steering committee for Army training facilities decided that land south of Cobar would be suitable for the manoeuvres area. In May 1985 Singleton and Dubbo were rejected for the schools area, and Bathurst-Orange again became subject to a detailed environmental study as a site for that purpose. All this time, in all those areas, a catastrophic effect was being felt by the community and landholders concerned. It was a terrible lesson for the community. The matter was further confused in 1984 when, as honourable senators will remember, we had an election. During that campaign the Prime Minister (Mr Hawke) was in the Orange- Bathurst area and, according to statutory declarations I have seen, he gave frequent assurances to the people in that area that whatever happened there would not be an Army land grab in the Bathurst-Orange area. A further complication and further uncertainty was then introduced. However, in spite of what the Prime Minister said at that stage and in spite of those clear assurances, we found in October last year that the Army's intentions again clearly were centred around the Bathurst-Orange area. It was at that stage that I felt that it was absolutely essential that the terrifying succession of events which were emerging, for anybody who had given them any sort of study, must be brought out into the clear light of day. It seemed to me that the only way the matter could be brought out into the clear light of day was by an investigation by a committee of the Senate. That has been the case. This report addresses that subject, not only adequately but also with great tenacity and clarity. In many ways this report will be seen as something of a yardstick for achievements of the Senate committee system. I agree with Senator Hamer on that point. Of course, we have the happy ending. The Army has now withdrawn its bid to take over productive farm land in the Orange-Bathurst area. It must do the same thing immediately where Cobar is concerned. The decision has been noteworthy too because it has been a triumph for members of the citizens movement concerned. I commend them for their persistence, their organisation and the determination with which they decided to dig in and fight this bureaucratic attempt to virtually destroy them without reason, and to destroy elements of this country and its economy without reason which is an even more serious matter. It is a classic lesson on how vigilant the community has to be when it deals with some sections of the bureaucracy. People in the same area who have the same sorts of problems might realise that the Government is not always there to help them. It should be there to help them; that should be its function. That is what a public servant is supposed to be about. I hope that the Government-and I say that to the Minister sitting here now, Senator Gareth Evans, who is representing the Minister for Defence in this place-has taken some note of the lessons in this matter. The Government should get up and freely acknowledge that it was wrong on this matter and that it was wrong to oppose this reference in the first place. I hope it will curb the bureaucracy and take a much stronger and harsher view of bureaucracy especially the areas of land acquisition in the future as a result of the object lesson that this presents. I look forward to subsequent reports of the Committee under this subject, because this is not the end of the matter. In particular, I will be most interested to read the conclusions of part (c) of the Committee's terms of reference which states: . . . the adequacy and appropriateness of current procedures in protecting the rights of individual landholders and communities in areas where acquisition is contemplated, in providing for fair and prompt compensation, and in providing for appeal procedures. That is a very important objective. If this Senate committee system can achieve that objective, if it can make suggestions to the Government, and land acquisition legislation can be amended accordingly, the Committee will have done a tremendous service to this nation. Senator BROWNHILL(New South Wales)(4.36) —I also commend this report of the Senate Standing Committee on Foreign Affairs and Defence and congratulate the Committee for the speed and diligence which it has shown in bringing down this report so quickly. I would like to congratulate especially the Chairman of the Committee, Senator McIntosh, for the way he made his Committee work so hard in getting on with the job. I would also like to particularly mention the three honourable senators from this side of the House who I know worked very hard too, especially Senator Sir John Carrick. The Committee looked at the need for the Army training areas. It has looked at the availability of sites which have been subject to acquisition. I have been involved from the outset because of the possibility of the taking of productive farm land and the disruption to the community in the area subject to the acquisition by the Government which is in my State of New South Wales. That is the reason I have been very interested in this matter from the start. The trauma and hardship caused to people in areas which are under threat of acquisition cannot be too highly stated. The Bathurst and Orange areas, of course, have already been relieved of the cloak that has been held over their heads for so long. Businesses, communities, property owners and employees have suffered because of this threat hanging over their heads. The Cobar area is still under threat. With the environment being as fragile as it is there I am quite sure that the environmental impact study will come up with the same conclusions as those of this Committee, that the area is not appropriate for an Army training base. The area must now be released in order to remove the trauma of the threat of acquisition from those people. The Committee has advised that the Singleton area is adequate and that it is a good area for the infantry training base. The people in that area too should be relieved of the worry that the base might have been taken away. That worry should have been taken out of the air straight away by the Minister for Defence (Mr Beazley) making a complete and unequivocal statement that the base is to stay at Singleton. The Singleton area in the Hunter Valley has suffered for too long. I commend this report. Again, I congratulate the Senate Committee in being so quick and diligent in its actions and its findings, and for coming back to the Senate so quickly with its report. Senator BOSWELL(Queensland)(4.39) —As one of the members of the Joint Standing Committee on Foreign Affairs and Defence which investigated the Army acquisition of land in both Cobar and the Orange-Bathurst areas, I would like to place my thanks on public record to Senator McIntosh, as the Chairman of that Committee, and of course, Senator Sir John Carrick, who put in so much work. I felt that it was a very worthwhile exercise to study the problems which the farmers in the Bathurst-Orange area were experiencing with the threat of acquisition on what was originally 173,000 hectares of land. Later that area was reduced to 73,000 hectares. We found that the overwhelming evidence pointed to the fact that 73,000 hectares in the Bathurst-Orange area would have been insufficient to allow the Army to take in all the facilities. The area would have been insufficient for what the Army required. We then travelled to Cobar only six or seven weeks ago and investigated that area. We spent some time flying around the area. We then drove around the Cobar district in four-wheel drives. We met many people who expressed concern for their land. Many children who spoke to us expressed their fears that their farms and animals would be taken away from them. We also noted when driving around in four-wheel drive vehicles that the soil was deep and fragile. At one stage we moved off the track and even our four-wheel drive vehicles began to become bogged. It was obvious to us that heavy army vehicles would get bogged and that the big trenches left by them would cause erosion. I believe that the report that has been put down is a good one. It is certainly one on which a lot of time has been spent. I hope that the recommendations in the report are taken up by the Parliament and the Minister for Defence (Mr Beazley). Senator VIGOR(South Australia)(4.41) —This is an excellent report from the Senate Standing Committee on Foreign Affairs and Defence. I would like to commend the six senators who conducted such a thorough investigation into land acquisition in New South Wales by the Australian Army. I trust that their further work on this matter will be as illuminating as is the current report. The report is a disturbing one for the Senate; it should be a troubling one for the Department of Defence; and I believe that it is a very important one for the Australian people. It is clear that the Department had not properly costed its proposals. Furthermore, the Department decided to withhold from the Committee information that did not advance its proposals. I believe that that is the most serious aspect which is covered in the introduction to the report. Even though the Committee pressed the Department of Defence for the relevant documents, it was basically fobbed off. The Committee was told that what was significant had been provided to the Committee. The Secretary to the Committee was told: The other papers relate to the deliberative processes of government and are not of a kind appropriate for release. This is Yes Minister stuff. It is Yes Minister type of activity at its worst. It is highly significant that private individuals eventually obtained the material under the Freedom of Information Act. The documents that were obtained in fact did not relate to the deliberative processes of government. Without the Freedom of Information Act, the Committee, and possibly the people of Australia, may have remained in the dark and a disgraceful miscarriage of government activity could have taken place. It is a disgrace that the relevant information had to surface in such a fashion. The principles of open government will have to be enunciated much more strongly by the upper echelons of the Department of Defence and be reinforced by the Minister for Defence (Mr Beazley). The Department has just come to us with a $290m request for additional estimates. This is on top of the allocation of $6,212m in the 1985-86 Budget. With that sort of expenditure, this Parliament must make sure that the best possible value is obtained for those enormous sums. It would be absolutely outrageous to cut down welfare and other expenditure and tolerate waste of the kind that has been shown to occur by the Committee and the waste which would have taken place had the Committee not acted effectively and had a group of public minded citizens not brought the matter to the attention of the Committee. No department should be allowed to waste large amounts of money, time and resources blindly defending decisions that were absolutely inappropriate in the first place. I hope that the Minister and his advisers, the watchdogs in the Department's own internal audit section or people from the Department of Finance will quickly put an end to this type of misbehaviour. In this case, though, it was left to public indignation and the open processes of the Senate committee system. The Committee has pointed out that the Department of Defence could not provide it with detailed costings associated with the development of the manoeuvre area. It could not tell the Committee what the cost of the Cobar proposal was. The Committee has pointed out that the terrain at Cobar was totally unsuitable for what the Department of Defence said it wanted to do. Factors such as environmental damage, dislocation for local grazing, dislocation of civil aviation had not properly been taken into account despite the investigation that had supposedly been carried out by the Department. In fact, the Department failed to make available to the Committee even the information that it did have. How can we allow millions of dollars to be spent on such unjustifiable pursuits? At page 28 of the report the Committee says: The unpredictability of rainfall is a very significant factor in the lives of landholders and is potentially a serious problem for Army planners seeking to organise exercises months or years in advance. The pattern of rainfall shown by these statistics also suggests that the claim by the Department in evidence to the Committee, that by exercising between March and November the Army would avoid the risk of having exercises washed out, was nothing short of wishful thinking. In fact, the statistics show that 70 per cent of the annual rainfall occurs in those months. The significance of the fact that very high rainfall can occur on single days is that creeks can rise very quickly, soil can become saturated and large volumes of water can accumulate in ditches and in vehicle tracks, thus impeding the movement of vehicles and people and as Senator Boswell said, there would be a significant risk of erosion. If this is indicative of the type of defence planning we have in this country, we should be examining the expenditure in the defence budget much more closely. I believe that the proposal would never have got off the ground if people inside the Defence Department had in fact thought about it logically. I believe that this Parliament must take a keener interest in the processes and allocations to the Department. We must look at projects on an individual basis. We have not seen the figures in respect of a similar range which is planned between Port Gawler and Port Prime in my own State of South Australia. This project may well be worth investigating. We should look at the purchase by the Army of Australian equipment. We should not just automatically buy overseas. Nothing seems to be done in this respect. Our offsets program is not taken seriously by people in the Department of Defence, to say nothing of the supplies. During an Estimates committee meeting I was told by the Minister for Resources and Energy (Senator Gareth Evans) that there are currently in the system $600m of outstanding offsets. This matter should be investigated as well. The enormous amount of money that is allocated to defence should be spent to ensure that we get a strong and independent Australia and we should not be left with very large bills as a result of the Department avoiding giving information to this Parliament. Question resolved in the affirmative. The PRESIDENT —I present the report of the Joint Committee on the Broadcasting of Parliamentary Proceedings on its inquiry into televising and radio broadcasting of both Houses and their committees, together with a copy of the transcript of evidence and a copy of the Committee's minutes of proceedings relating to the inquiry. The report reflects deliberations of the Committee extending over 3 1/2 years and three parliaments. During that time the Committee received evidence and consulted with members of parliament, parliamentary officers, broadcasting organisations, other specific interest groups and citizens of Australia. There were changes in the Committee's membership during that time and the Speaker and I commend members of the Committee, past and present, for the effort they devoted to the task of forming recommendations to both Houses on the vital question of the electronic delivery of proceedings. I pay particular tribute to the work of the former Speaker and Chairman of the Committee, the Honourable Dr. H. A. Jenkins. Among the principal recommendations of the Committee are that continuous radio broadcasting of the proceedings of the Houses should continue, with the allocation of the broadcast being determined by the Committee, as is the current practice. The Committee also recommends that the broadcast of proceedings be extended to cover adjournment debates. The report also recommends that a parliamentary radio network be established and that the proceedings of parliamentary committees, meeting when neither House is sitting, be available for radio broadcasting. The report recommends that broadcasting of recorded excerpts of proceedings be authorised on a permanent basis, provided that the trial period is satisfactory. When the Committee's special report recommending the re-broadcast of excerpts was presented in the Senate, an undertaking was given to inform the Senate of the results of monitoring of television and radio station usage. That information is contained in an appendix to the report. In relation to televising of proceedings, the Committee has recommended against televising in the provisional Parliament House but that proceedings of the Senate and the House of Representatives and their committees be available for televising in the new Parliament House, subject to guidelines which were adopted for the televising of the Budget speeches in the House of Representatives. However, there should be no compulsion to televise proceedings. The Committee has also recommended the establishment of a Parliamentary Audio Visual Unit. The report contains a number of other recommendations relating to protection provided to broadcasters, the impact of access of the electronic media on parliamentary practices or conventions, control of access to the sound and vision signals and revision of the Parliamentary Proceedings Broadcasting Act. I commend the report to the Senate. Senator WATSON(Tasmania)(4.51) —I move: That the Senate take note of the report. Mr President, I commend you on the remarks you have made. The Australian Parliament was the second national parliament of the Commonwealth to introduce the broadcasting of proceedings. These broadcasts of proceedings are overshadowed, as it were, by the Joint Committee on the Broadcasting of Parliamentary Proceedings, which is made up of members drawn from the two major parties from both Houses. The Joint Committee is required by the Parliamentary Proceedings Broadcasting Act to report to each House on the general principles concerning the broadcasting of proceedings of each House and to determine the allocation of broadcasts in accordance with the general principles adopted by each House. In 1982 the Committee was given a reference by the Parliament to look into a number of issues. Those terms of reference were widened in 1983 to include the televising of the proceedings of the Houses of Parliament and their committees in the present and the new Parliament House and the radio broadcasts of proceedings of both Houses of Parliament and their committees, including the continuous and simultaneous broadcasts of both Houses. I take this opportunity to commend Dr Jenkins for his leadership through practically the whole of this very long and exhaustive inquiry. I pay tribute to you, Mr President, for your part and to my colleague Senator Ruth Coleman, because I think the three of us from the Senate were the only members who saw the inquiry through from beginning to end. The Committee's recommendations are quite significant. As you mentioned, Mr President, the first recommendation is that the continuous broadcasts of the proceedings of the Houses of Parliament should continue. A number of honourable senators will be pleased that we have decided to recommend the inclusion both of the adjournment debate and of the proceedings of parliamentary committees, provided in the latter case that either House is not sitting. The establishment of a parliamentary network, I believe, is a forward move because it will relieve the Australian Broadcasting Corporation of the responsibility for parliamentary broadcasts. The new body will be under the control of the Parliament. It will undertake to establish a network Australia-wide for as little as about $1.5m. The establishment of a Parliamentary Audio Visual Unit is also an important recommendation because this will make available for transmission live or recorded segments for use in documentaries and news commentaries. While there will be a continuous broadcasting on radio, the televising of Parliament will be as required by the various networks. In other words, there will be no compulsion on the televising of Parliament; the networks can pick up the signal as needed. I think this is a significant recommendation. The report has only just come to the Parliament, but I commend its reading to all honourable senators. Question resolved in the affirmative. The PRESIDENT —The conditions for granting access to proceedings of the Senate and the House of Representatives for the purpose of recording and broadcasting excerpts, as contained in appendix 2 to the report of the Joint Committee on the Broadcasting of Parliamentary Proceedings, which I have just presented, were those in effect when the Committee agreed to the report. On 2 June 1986 the Committee agreed that guidelines 5a and 7 be amended as follows: 5a. Excerpts of proceedings which are subsequently withdrawn shall be available for re-broadcast provided the withdrawal is also reported. 7. Events in the Galleries are not part of the proceedings and excerpts in relation to such events, as far as is practicable, should not be used. The revised conditions for access are to take effect as from 5 June 1986 and copies are being circulated for the information of honourable senators. Senator TATE(Tasmania) —I present the ninth report of 1986 of the Senate Standing Committee for the Scrutiny of Bills concerning the Australian Institute of Sport Bill 1986, the Bounties Bill 1986, the Copyright Amendment Bill 1986, the Customs Tariff Amendment Bill 1986, the Dairy Produce Bill 1986, the Dairy Produce Levy (No. 1) Bill 1986, the Health Legislation Amendment Bill 1986, the Industry Research and Development Bill 1986, the Taxation Laws Amendment Bill (No. 2) 1986, the Taxation Laws Amendment (Foreign Tax Credits) Bill 1986, and the Wildlife Protection (Regulation of Exports and Imports) Amendment Bill 1986. I also lay on the table Scrutiny of Bills Alert Digest No. 10, dated 4 June 1986. Ordered that the report be printed. Senator JONES(Queensland) —On behalf of the Standing Committee on Science, Technology and the Environment, I present a report on annual reports of the Australian National Parks and Wildlife Service and the Department of Territories, together with a transcript of evidence. Ordered that the report be printed. Senator JONES —by leave-I move: That the Senate take note of the report. I seek leave to incorporate my speech in Hansard. Leave granted. The speech read as follows- The Committee held a hearing following the tabling of the Government's 27 November 1985 response to the Committee's report on the Preservation of the Abbott's Booby on Christmas Island. The Committee's report was tabled on 2 November 1983. The inquiry into the preservation of the endangered Abbott's Booby on Christmas Island arose out of the consideration of the annual report for 1980-81 for the Australian National Parks and Wildlife Service. The transcript of evidence contains up-to-date information on measures being taken for the preservation of the Abbott's Booby, and matters relating to the future of Christmas Island once the Phosphate Mining Company of Christmas Island ceases its mining operations. It was announced in October 1985 that the major A-grade mining operation would close down by the end of 1986. However, a working group has been investigating ways of maintaining the mine's economic viability. Currently it is uncertain how long the mine will continue to operate. The Committee heard evidence on the Abbott's Booby Monitoring Program; on the extension of Christmas Island National Park; on measures being taken to rehabilitate mined out areas of the Island; and on alternative industries for Christmas Island once the mine closes. Abbott's Booby Monitoring Program The Abbott's Booby Monitoring Program established to monitor the breeding success of Abbott's Booby formally commenced on 1 July 1983. The October 1985 Report of the Abbott's Booby Monitoring Program Expert Panel, and the minutes of the meeting of the Expert Panel held on 9 October 1985 are incorporated in the Transcript. Preliminary findings indicate that forest clearing does have deleterious effects on the birds' nesting success which diminish the value of the nesting habitat to at least 305 metres beyond the cleared areas. This is indicated by nests being abandoned at a greater rate near forest clearings, especially those clearings to the south-east of nest sites. If the tree containing the nest is also to the south-east, the situation is further aggravated. Areas within 305 metres of clearings have displayed a higher rate of nest site abandonment and have attracted proportionately fewer nests since 1979-80 than areas further away from clearings. Annual reoccupation of nest sites since 1979-80 has been approximately 86% within 305 metres of clearings, compared to about 96-98% beyond 760 metres. Birds occupying new sites have had lower nesting success than birds in familiar sites. Approximately 40% of the remaining known Abbott's Booby nesting habitat is beyond 305 metres, and approximately 12% is beyond 760 metres of existing clearings. The Expert Panel's recommendations in the October 1985 Report are: The study should run its full six years; Clearing of intact forest within 305 metres of areas containing significant numbers of Abbott's Booby should be avoided, particularly when such clearing is to the South-East; Rehabilitation of clearings near to and particularly to the South-East of significant concentrations of Abbott's Booby should be afforded priority. The Expert Panel reported that the program is being satisfactorily jointly funded by the Australian National Parks and Wildlife Service and the Phosphate Mining Company of Christmas Island. The Abbott's Booby Monitoring Program is making a significant contribution to the understanding of the impact of clearing for phosphate mining operations on the breeding success of the Abbott's Booby. The findings are also relevant to any future activities on the island which involve clearing primary rainforest. The Extension of Christmas Island National Park In its 1983 Report on the Abbott's Booby, the Science, Technology and Environment Committee recommended that the inclusion of Block 22a and Smithson's Bight Terrace into Christmas Island National Park be investigated. Both are to the south-east of the National Park. I am pleased to report to the Senate that two new areas were declared national park land on 13 January 1986. One area is 320 hectares of land adjoining the south-eastern end of the National Park, including Abbott's Booby habitat in or near Block 22a. The other is a 450 hectare segment of land at North-West Point, which contains significant nesting areas of other seabirds. Rehabilitation The need to increase the rate and area of the rehabilitation of mined out areas has been of major concern to the Committee. It was reported to the Committee that during the past two years the mining company has back-filled, top-soiled and planted areas comparable to those they have cleared. The areas where there are exposed limestone pinnacles are extremely difficult to rehabilitate. The cost of rehabilitation varies from $1,200 a hectare to $25,000 a hectare. The Committee was told none of the current approved proposals for forest clearing endanger the Abbott's Booby nesting sites. However, if the full clearing program proposed the previous year went ahead, the nesting sites would be affected. The main priority in terms of conservation is seen as maintaining the ecological integrity of the Island, and species protection. The other priority is to ascertain the extent which areas not of major ecological importance should be regenerated for non-conservation purposes such as market gardens. The Committee welcomes the progress being made to rehabilitate mined areas and restore the Island's forests, and urges the continuation of rehabilitation and reafforestation measures. Alternative Industries The Committee also heard evidence on investigations into the feasibility of various alternative industries for Christmas Island once mining operations cease. The Department of Territories is interested in pursuing action on as many fronts as possible to maintain the future economic prosperity of the Island, and to enable a settled population to remain on the Island. The Land Use Study by the Western Australian Overseas Projects Authority completed in November 1985, is providing a basis for assessing proposals. The development of tourism is one proposal. People interested in conservation or ornithology, in particular, are likely to be interested in visiting the Island. A proposal has been put forward to develop a hotel-style holiday village, which would include a casino. This is being seriously considered. Another possibility is the establishment of a scientific research station. This is currently being examined by the Australian National Parks and Wildlife Service and the Department of Territories, in consultation with various Commonwealth and private sector agencies. Small agricultural and business enterprises should be feasible. Conclusion The Committee is generally happy with the efforts being made to preserve the Abbott's Booby, and to maintain the existing unique ecology of Christmas Island. The Committee will continue to monitor the preservation of the Abbott's Booby on Christmas Island as part of its mandate to examine Annual Reports. I commend the Transcript of Evidence to the attention of Honourable Senators. Senator JONES —I seek leave to continue my remarks on the resumption of the debate. Leave granted; debate adjourned. Senator COATES(Tasmania) —I seek leave to make a brief statement on a matter before the Standing Committee on Finance and Government Operations. Leave granted. Senator COATES —This matter concerns the 1983-84 annual report of the Australian Capital Territory Parole Board. On 7 May I made a short statement, as the Chair of the Committee, about the non-tabling of the 1983-84 annual report of the Australian Capital Territory Parole Board. I mentioned in my statement the fact that the Committee had written to the Chairman of the Board in October 1985 and unfortunately and inexplicably had not received a reply, despite several inquiries. I sent a copy of my statement to both the Parole Board and the Attorney-General (Mr Lionel Bowen) for their information. I now inform the Senate that the Committee received an immediate reply from the Chairman of the Parole Board, Justice Gallop, informing the Committee of the reasons for the delay in preparing and tabling the 1983-84 annual report. The explanation seems to me to be rather weak-an oversight on the part of the Secretary of the Board; that person having other duties in the Attorney-General's Department-but the Chairman has indicated that the Board intends to remedy the situation forthwith, and that he will express his apology and regret to the Attorney-General. I seek leave to incorporate in Hansard the letter from the Board's Chairman. Leave granted. The letter read as follows- 9 May 1986 Senator John Coates, Chairman, Standing Committee on Finance and Government Operations, Australian Senate, Parliament House, Canberra. A.C.T. 2600 Dear Senator Coates, I am writing to you to respond, very belatedly, to your letter of 18 October 1985 and your statement to the Senate on 7 May 1986 concerning the failure of the Parole Board of the Australian Capital Territory to furnish its 1983-84 annual report. I apologise for the delay in answering your letter. It arrived while I was overseas and upon my return has been overlooked. The failure to furnish the 1983-84 Annual Report has been rectified. The draft report and the 1984-85 draft Annual Report have been prepared. I am informed that it takes about three weeks to have them printed and they will then be furnished to the Attorney-General pursuant to s. 27a of the Parole Ordinance 1976 of the Australia Capital Territory. The failure to furnish the 1983-84 Annual Report until now requires some further explanation. The Parole Board is comprised of a Chairman and four part-time members. It has no staff or premises of its own. The Secretary of the Attorney-General's Department kindly makes available an officer of that Department to perform the necessary duties as Secretary of the Board. Such duties are, of course additional to the discharge of his ordinary duties. Accommodation for meetings of the Board is provided by the Registrar of the Supreme Court of Australian Capital Territory. The Chairmanship of the Board changed upon the resignation of Mr F. X. L. Connor, Q.C. as Chairman of the Board in February 1985. I myself was appointed by the Attorney-General as Chairman of the Board in May 1985, although I held an appointment as Acting Chairman prior to that date. The failure to furnish the 1983-84 Annual Report was, I am informed, due to an oversight on the part of the Secretary to the Board and the change in the personalia comprising the Board. You mention in your letter of 18 October 1985 that there has been an apparent contravention of s. 34c of the Acts Interpretation Act. Section 34c relates to the requirements imposed by an Act of the Parliament. The obligation of my Board to prepare and furnish to the Attorney-General a report of its operations during the year is imposed by s. 27a of the Parole Ordinance 1976 of the Australian Capital Territory. I respectfully suggest therefore, that there has been no failure to comply with s. 34c of the Acts Interpretations Act 1901. I do agree, however, that s. 27a has not been compiled with and I shall be expressing my apology and regret to the Attorney-General. I trust that the explanation herein is accepted and give an assurance that my Board's failure will be rectified at the earliest possible moment. Yours sincerely, J.F GALLOP Chairman Senator COATES(Tasmania) —by leave-The 1983-84 annual report of the Australian Capital Territory Gaming and Liquor Authority-or GALA-was tabled in the Senate on 16 September last year. The annual report came to the attention of the Standing Committee on Finance and Government Operations for two reasons: The delay in its tabling, which was some 14 months after the end of the subject financial year; and qualifications by the Auditor-General of the Authority's financial statements regarding the investment of moneys. The Committee has been examining both these issues by correspondence. The Committee received explanations for the delay from the Authority and the Minister for Territories (Mr Scholes) and intends making recommendations on a number of matters in a report to the Senate. As to the qualification of the financial statements, one matter raised by the Auditor has been resolved. However, the second matter, which involves a dispute as to the interpretation of the Australian Capital Territory Poker Machine Control Ordinance, remains unresolved. As this matter has raised important issues involving the role of the Auditor-General and the responsibility for the interpretation of Commonwealth legislation, the Committee has now sought information from the Auditor-General about advice he has sought from the Attorney-General's Department, before concluding its inquiry. As soon as possible after receiving this further information, the Committee will finalise its report and table it in the Senate. Assent to the following Bills reported: Appropriation Bill (No. 3) 1985-86 Appropriation Bill (No. 4) 1985-86 Appropriation (Parliamentary Departments) Bill (No. 2) 1985-86 Social Security Legislation Amendment Bill 1986 Customs and Excise Legislation Amendment Bill 1986 Consideration resumed. The Bills. Senator WALSH(Western Australia-Minister for Finance)(5.04) —On behalf of the Government I propose to move a technical amendment which has been circulated. The amendment is to clause 19 of the Taxation Laws Amendment Bill 1986, which proposes to insert a new section 169a in the Income Tax Assessment Act to facilitate the introduction of a system of self-assessment of income tax returns. In describing a taxpayer's income tax return, proposed new sub-section 169A (1) refers to a `return of the income' of a taxpayer, whereas other provisions in the Act refer to `return of income'. The amendment which I am proposing will do no more than bring that proposed new sub-section into line with other sections. As an amendment to the Taxation Laws Amendment Bill 1986, I move: Page 25, clause 19, line 41, leave out `the'. Senator MESSNER(South Australia)(5.05) —As I understand it, the amendment is purely technical. The amendment is unexceptionable as far as the Opposition is concerned. Consequently, we see no problem with that amendment. However, I am a little concerned about the general implications of what the amendment means in relation to the clause, purely because the main thrust of the Opposition's objection to this part of the Bill-that is, that part dealing with the amendment of assessments-is very much tied up with our concern that there has been inadequate public discussion about the Government's move towards a system of self-assessment. This Bill has certainly sprung the system upon the community. Consequently, I do not think there has been a reasonable period for the community to discuss the implications of it. That is particularly evident when we consider the amendments that are proposed in this Bill to those sections of the Act dealing with the powers of the Commissioner of Taxation to amend assessments. Already there has been considerable community reaction to that matter. Consequently, that will be the subject of later debate. Subject to that being so, and there being no difficulty in terms of our debating those issues later, we see no problem with this Government amendment. Amendment agreed to. Senator SIDDONS(Victoria)(5.07) —As an amendment to the Taxation Laws Amendment Bill 1986, I move: Page 26, clause 19, after proposed new sub-section 169a (1), insert the following new sub-section: `(1a) Notwithstanding sub-section (1), where, in a document furnished with a return of income of a taxpayer of a year of income and signed by or on behalf of the taxpayer, a question is raised that is relevant to the liability of the taxpayer to tax in respect of the year of income, the Commissioner shall give attention to that question.'. I will refer briefly to that amendment. We are, of course, having a Committee stage debate on the Taxation Laws Amendment Bill 1986. This piece of legislation introduces the provision for self-assessment, so it is a very important piece of legislation. The Australian Democrats generally support self-assessment. The present method of assessing tax returns is outdated and inefficient. Under the principle of self-assessment which we are now debating, each taxpayer will be charged with the responsibility of compiling his or her own return and assessing the amount of tax payable or the refund that should be received. The Australian Taxation Office will no longer examine every taxpayer's return. Instead, there will be a random audit of a percentage of the returns each year. If a taxpayer is found to be trying to defraud the system, taxes and penalties will have to be paid. On the other hand, if the taxpayer is found to have paid too much tax, there will be a refund, with interest, to the taxpayer. Self-assessment is needed for a number of reasons, the Democrats believe, not the least of which is that the present system is falling down under its own weight. The job of vetting every individual taxpayer's return every year is a very difficult job for the staff of the Taxation Office. It is a soul destroying and very monotonous job. These highly competent, highly specialised members of the Office could be much better employed in random auditing and more investigative types of work. The self-assessment will free the staff of the Taxation Office to do just that. This is a good thing. However, it is important to realise that under this legislation a period of three years can elapse before the Australian Taxation Office or the Commissioner of Taxation has to comment on an individual taxpayer's return. As we all know, tax law is extremely complex and it is very difficult for the ordinary taxpayer to be absolutely certain that his or her return, as filled in, complies with the principles of the taxation law. There could easily be all kinds of queries in the taxpayer's mind. The Australian Democrats felt that it was unfair for the Taxation Office to be completely freed of any responsibility to answer genuine questions, at least in principle, that a taxpayer may raise. That is essentially the thrust of our amendment. It requires the Taxation Office to reply to the taxpayer if that taxpayer furnishes a query with the return, indicating that he or she is uncertain about a matter of law, fact or principle. We believe that at least this will go some of the way to placing some responsibility on the Commissioner of Taxation and his office for the smooth introduction of self-assessment. The taxpayer, under this amendment, could reasonably expect to receive in due course an answer to his or her queries and would not have to wait for three years to be certain that the tax return, as filled in, was correct. It is important to state that the Commissioner cannot be expected to give a ruling on a taxpayer's return. The principle currently used is that any problems, inaccuracies or attempts to defraud the Commissioner must be assessed on a case by case basis and it would be impossible to expect the Commissioner to rule on a query that a taxpayer could raise with his or her return each year. However, matters of principle certainly can be commented on and this amendment will put the responsibility on the Commissioner to do just that. I trust that all honourable senators will support this amendment. It will ensure that all taxpayers are afforded human justice by the Australian Taxation Office and that is the least that we can expect. This legislation is a move to update a procedure which is outmoded and therefore the Australian Democrats believe that self-assessment, which is practised in many Western countries, including the United States, is a very important step in the right direction. It will help to bring efficiency to the Taxation Office and it will free officers to carry out the important investigatory work into fraud which has so often occurred in this country. Senator MESSNER(South Australia)(5.14) —It is important to get the issues clear at the outset in this debate. Firstly, the Opposition has no concern about the general principle of implementing a scheme of self-assessment followed by audit of taxpayers. I believe that that could help very greatly in assisting the efficiency of the Australian Taxation Office in the processing of returns. However, we must acknowledge that, as a result of even the present methods of audit of taxpayers, there is very considerable concern in the community about the way in which the Commissioner of Taxation undertakes that work. There are great concerns about the way in which there appears to be a very formal, computer-driven control of events that follow taxpayers' audits, really extending the power of the Commissioner very greatly. One wonders whether the rights of taxpayers are not being unduly infringed in several circumstances. I recall a recent letter from a constituent who evidenced that he had received no fewer than four summonses issued for the lodgment of a taxation return. Each time the summons arrived he replied that the return had been properly lodged and that there were no problems with it, but still the summonses kept coming. There appears to be no way of shutting off the bureaucratic machine once it cranks up and gets into action. That kind of thing engenders a great deal of concern in the community and, more than that, creates an atmosphere of bad relations between taxpayers and the bureaucracy which controls the Australian Taxation Office. If anything can be done to improve that situation and build up a better relationship between the public generally and the Taxation Office, I am for it. However, it seems to me that now the Government is moving towards self-assessment, it is important that it carries the taxpayers with it so that they have a thorough understanding of what the Government is on about. It is important that at the outset the guidelines for the Government's investigation of people's affairs should be properly laid down so that people understand what can happen to them. It is important-and I am sure the Minister for Finance (Senator Walsh) would agree-that that kind of understanding should build respect for the tax system, but I am bound to say that at present there is clear evidence in the community of growing disrespect for it. I would hate to think that a brand new initiative, such as the self-assessment system, which has considerable merit, could lead to an increase in the degree of disrespect for the Taxation Office. In my opinion that disrespect is growing very rapidly at present. For that reason the Opposition has adopted what I believe to be the right position. We intend to move for the referral of the relevant clauses of the Bill, which I will come to in a moment, to the Senate Standing Committee on Finance and Government Operations so that there can be a proper examination of the self-assessment idea. Taxation Office officials can come before that Committee and give evidence and demonstrate publicly what the new system will be, how it will work and how people and their rights will be affected. I believe that is a reasonable proposition at this time when there is such concern in the community. I will return to the question of assessment issues in a moment. I wish to address the points raised by Senator Siddons in his amendment which seeks to have statements given by the Commissioner of Taxation which somehow appear to be rulings in favour of particular taxpayers when those taxpayers seek them. I am afraid that this amendment is totally without merit in that it has absolutely no binding powers upon the Commissioner to provide information and clearly does not in any way assist the situation. For that reason we cannot support the Democrats in this move because we believe it will provide the taxpayer with nothing. It will give him no protection and nothing upon which he can base his decisions on future actions. Indeed, I go as far as to say that what the Democrats are proposing is nothing more or less than what the Commissioner already does in practice. He sometimes gives rulings in advance to taxpayers on what might be the outcome in a certain situation, but he then enters the caveat that that ruling is not binding upon him and that he has the right to change his view when he comes at some later time to finally assessing the proposition that is put forward in that income tax return. I believe that the Democrats are really trying to kid us, if they are not kidding themselves, with this amendment. There certainly is no merit in the proposal at all, as I see it. Senator WALSH(Western Australia-Minister for Finance)(5.21) —The Government does not oppose the amendment. Amendment agreed to. Senator MESSNER(South Australia)(5.22) —Clause 20 of the Taxation Laws Amendment Bill is the crux of our problem with the Government's legislation. It is rather a shame that we are not debating this Bill cognately with a piece of legislation to be debated later on, the transfer of jurisdiction of taxation boards of review from within the Australian Taxation Office to the Administrative Appeals Tribunal. I say that because the number of issues before us-the introduction of a new system of assessment of taxpayers together with the new regime of penalties, the change to the way in which the Commissioner of Taxation can alter the assessments of taxpayers virtually at will and, of course, the change to the situation of the boards of review which undoubtedly could occur as a result of the transfer of their jurisdiction to the Administrative Appeals Tribunal-all represent a major change. I do not believe and the Opposition does not believe that there has been sufficient discussion in the community on the intentions of the Government and on how we might develop a sound and solid system for the future. We start from the proposition that we are not talking about just one particular part of this Bill but rather that forces are at work which undoubtedly will seriously and fundamentally change the way in which taxpayers will be assessed in the future. I believe that gives even more force to the Opposition argument that it should move to have this whole area opened up for public debate. Consequently, at a later stage, we will move that the clauses in connection with the amendment of assessments be referred to the Senate Standing Committee on Finance and Government Operations. I turn to clause 20 and our concerns in that regard. As the Minister for Finance (Senator Walsh) probably knows, the system that presently operates provides for the Commissioner to change the assessments of taxpayers within certain bounds and certain time limits. Basically, all that can happen is that the Commissioner has the power to amend assessments for reasons connected with the correction of errors and mistakes of law and fact. Now we find provided in this clause new powers for the Commissioner to amend an assessment for any reason which could include the correction of an error of law. Again, considerable disquiet has been expressed in the community about this provision, because the proposed extension of the powers of the Commissioner is really quite great. Most of the criticism concerns the lack of certainty that will result from a taxpayer not knowing his final tax liability, even if a full and true disclosure has been made by that taxpayer in his income tax return. Until now, a fundamental aspect of our assessment procedure has been that if a full and true disclosure has been made by a taxpayer, no amendment to increase the liability can be made to reflect a changed interpretation of the law but as I mentioned earlier, an amendment can be made only to correct an error of calculation or a mistake of fact. It seems that these amendments will now empower the Commissioner to amend assessments to increase one's tax liability due to a change in the interpretation of the law. If an assessment were issued by the Commissioner, say, three years ago on the basis of the law in force at that time and subsequently, a change in the law is brought about as a result of a decision of a court, that new law could be applied to the earlier assessment and, consequently, that assessment could be reopened and a new one issued on the basis of that new law. We have considerable concerns about the effect of that proposal. The Liberal and National parties believe that, apart from anything else, that proposal should be subject to the wider examination of the Senate Standing Committee on Finance and Government Operations. We can understand how, from the Government's standpoint, that principle might be thought to be admirable in terms of the introduction of the new system of self-assessment and of audit. I believe that the problem is that we do not know how far it will extend, what will be the bounds of this new power for the Commissioner and, indeed, how he intends to administer it. When members of the public get to know just how powerful the Taxation Commissioner will be as a result of this law being enacted, they will become very concerned. As a result, we believe that the appropriate action which the Parliament ought to take at the moment is to expose the issues, to receive public evidence on the matter, and that taxation officials should explain their position and give proper evidence to the Standing Committee on Finance and Government Operations. As such, at some later stage, we will move that that matter be referred to the Senate Committee for inquiry and report. Senator WALSH(Western Australia-Minister for Finance)(5.28) —I am not sure that I heard Senator Messner when he first spoke on the Bill, but I think he was complaining about the Government's haste. I do not know whether he was talking about policy or the Bill, but I think the term he used was that it had been sprung on fairly quickly. It is true that the Bill may not have been available for a very long time. The policy was announced by the Treasurer (Mr Keating) in the Budget statement last year. The only purpose of clause 20, about which Senator Messner spoke more recently, is to enable the Commissioner of Taxation to correct errors of law as well as errors of fact. I am told that precisely the same provisions are to be found in the taxation Acts of other countries which practice self-assessment-countries such as the United States of America, the United Kingdom, New Zealand and Canada. It seems to have been overlooked by Senator Messner that the corrections can be made in both directions. The tone of his remarks was to the effect that corrections would be made only to the disadvantage of the taxpayer. On the question of changes to the interpretation of the law that may have been made in the second or third year of the three-year period, the policy of the Commissioner of Taxation will be not to amend assessments as a result of a change in the interpretation of the law. Where an assessment is made on the basis of the interpretation of the law existing at the time of lodgment of the return, an assessment will not be amended to increase a taxpayer's liability because of the changed interpretation of the law. It is the Commissioner's intention to issue a taxation ruling on this matter upon the Bill becoming law. Senator MESSNER(South Australia)(5.31) —Turning to clause 21 of the Taxation Laws Amendment Bill I want to draw attention to the fact that, where interest is to be paid by the taxpayer where there has been an amended assessment, that interest will not be tax deductible. In that way, the taxpayer will not be able to get the benefit of a tax deduction for it. But in the opposite situation, where the Commissioner of Taxation will be paying interest to the taxpayer, that interest becomes taxable. It seems to me to be incongruous, unfair and unjust that it works in the Government's favour both ways. Surely it would be reasonable to allow the tax-payer a tax deduction for interest paid to the Taxation Commissioner where, in the reverse situation, it is assessable to the taxpayer. I would just like some explanation from the Government as to why it has drawn the legislation in that fashion. It certainly seems to me to be an unfair part of this legislation and it gives even more force to our argument that the Bill should be stood over for examination by the Senate Standing Committee on Finance and Government Operations. Senator WALSH(Western Australia-Minister for Finance)(5.32) —There are a number of reasons for that provision for non-deductibility of an interest payment being in the legislation. I do not think Senator Messner mentioned that it is not a penalty interest payment; it is related to the bond rate. I am informed that the intention is to maintain that relationship between the bond rate and the interest rate and that it can be changed by regulation. It would not require a subsequent amendment to the Act. But among other reasons, to allow deductibility in this instance would open up the question of deductibility of the penalty interest rates which are charged for inaccurate information, or evasion, I suppose. I do not place that much store on that. Given that whether an error is detected with a self-assessment system has elements of a lottery in it because the audit rate, if I remember correctly, even when the system is fully established, will only be about three per cent, and there would be an incentive for taxpayers to take their chances of not having the error picked up and, therefore, being able to claim a tax deduction for something which they otherwise would not be able to claim a tax deduction- Senator Crichton-Browne —That is, 3 per cent are audited every year. Senator WALSH —I will take some further advice on that. As I understand it, that 3 per cent will be thoroughly checked at the time they are received. Senator MESSNER(South Australia-5.34) —Can the Minister confirm that it is 3 per cent? Senator Walsh —I am told that it is 2 per cent. Senator MESSNER —I would like then to refer quickly to clause 11 which deals with the negative gearing aspects of this legislation. We had very considerable debate on the negative gearing aspects during the second reading debate. There is just one little point on which I would like the Minister's clarification. In the amendment to the Bill, which provides for a proposed new section 82KZC, sub-section (6), we speak of the net rental value of properties where those properties are owned by companies. As I understand it, the new law will provide that the net rental of the property must bear no more than a 75 per cent ratio to the net value of the company. The point I would like to make here is that we all know how difficult it is to assess the net value of a property or the net value of a company's assets. The difficulty that I see arising is how the Government will administer this when there are likely to be fluctuations in the value of the assets of the company. I think of the situation where good will could move up or down in a matter of days depending upon the fortunes of the company, or some legal action, or some subcutaneous occurrence which affects the welfare of the company. All kinds of factors could apply which would make it extra- ordinarily difficult for a company to be able to establish that it is within the law one day and outside the law another day. Consequently, I would appreciate very much the Minister's comments on that matter as I believe that it is a very real practical difficulty for those companies that are engaging in quite legitimate project development operations. Senator WALSH(Western Australia-Minister for Finance)(5.36) —I refer Senator Messner to an answer at the bottom of page 4 of the Bill where `net worth' is defined as follows: `net worth', in relation to a company, partnership or trust estate, means the total value of the assets of the company, partnership or trust estate, as reduced by the total liabilities of the company, partnership or trust estate; That is such as the assets, minus the liabilities, as I would expect them to appear on the balance sheet. Senator MESSNER(South Australia)(5.37) —The Minister is saying that the balance sheet figures at any time are the point of reference at which the ratio is determined. I would like to know at what point of time that balance sheet is established because within a year of income there would be fluctuations in those assets depending upon the circumstances of the company. Senator WALSH(Western Australia-Minister for Finance)(5.38) —I am told that it is not necessarily a balance sheet figure; it may be the balance sheet figure, because there may or may not have been a revaluation of assets incorporated in the balance sheet. But it is the question of fact of what are the current assets less liabilities. Senator MESSNER(South Australia)(5.39) —In other words, the Minister is confirming that an up to date valuation is required. Senator Walsh —Yes. Senator MESSNER —Perhaps the point can be easily illustrated as follows: Let us assume that a company has shares in other companies that are listed on the stock exchange. Every day, no doubt, the value of its assets will be fluctuating according to the value of the shares which it holds which are listed on the stock market. As a result, the ratio which we are seeking to keep within-the 75 per cent level-could vary a great deal. But the Minister has answered the point that the taxpayer will be put to some considerable disadvantage as a result. Bills agreed to. Bills reported with amendment; report adopted. Motion (by Senator Walsh) proposed: That the Bills be now read a third time. Question put. The Senate divided. (The President-Senator the Hon. Douglas McClelland) Ayes . . . . . . . . . . . 36 Noes . . . . . . . . . . . 28 —— Majority . . . . . . . . . 8 —— Aulich, T. Jones, G. N.Black, J. R. McClelland, DouglasBolkus, N. McKiernan, J. P.Childs, B. K. Macklin, M. J.Chipp, B. K. Maguire, G. R.Coates, J. Morris. J.Colston, M. A. Ray, RobertCook, P. F. S. Reynolds, M.Cooney, B. Richardson, G. F.Crowley, R. A. Robertson, E. A. (Teller)Devlin, R. Ryan, S. M.Elstob, R. C. Sanders, N. K.Evans, Gareth Sibraa, K. W.Foreman, D. J. Siddons, J. R.Georges, G. Tate, M. C.Gietzelt, A. T. Vigor, D. B.Giles, P. J. Walsh, P. A.Haines, J. Zakharov, A. O. Alston, R. K. R. Knowles, S. C.Archer, B. R. Lewis, A. W. R.Baume, Michael MacGibbon, D. J.Bjelke-Petersen, F. I. Messner, A. J.Boswell, R. L. D. Newman, J. M.Brownhill, D. G. C. Parer, W. R.Carrick, Sir John Puplick, C. J. G.Chaney, F. M. Reid, M. E. (Teller)Collard, S. J. Sheil, G.Crichton-Browne, N. A. Teague, B. C.Durack, P. D. Townley, M.Guilfoyle, Dame Margaret Walters, M. S.Hamer, D. J. Watson, J. O. W.Hill, R. Withers, R. G. Kilgariff, B. F. Coleman, R. N.Short, J. R. Grimes, D. J.Jessop, D. S. McIntosh, G. D.Baume, Michael Button, J. N. Question so resolved in the affirmative. Bills read a third time. Consideration resumed from 30 May, on motion by Senator Grimes: That the Bills be now read a first time. Question resolved in the affirmative. Bills read a first time. Senator WALSH(Western Australia-Minister for Finance)(5.45) —I move: That the Bills be now read a second time. I seek leave to incorporate the second reading speeches in Hansard. Leave granted. The speeches read as follows- TAXATION LAWS AMENDMENT (FOREIGN TAX CREDITS) BILL 1986 This Bill will give effect to the proposal announced in the Treasurer's 19 September 1985 tax reform statement to replace the present double taxation relief arrangements of the income tax law with a general foreign tax credit system. Since that statement, detailed consideration has been given to the most appropriate arrangements for a foreign tax credit system in Australia. In this process, the Government has considered representations from many sources, and held discussions with interested business groups. In the light of these further deliberations, the details of the system that I will shortly describe differ in some respects from those outlined in the September statement. These differences generally tend to lessen the tax impact of the proposal on Australian residents. However, the information gained in this process has confirmed the Government's view that the present manner of treating foreign source income of Australian residents is not consistent with the general equity, neutrality and efficiency objectives of a sound taxation system. As well, the present treatment encourages Australians to avoid tax by arranging to give their income an artificial overseas source. The Asprey Committee, in 1975, recommended the introduction of a foreign tax credit system in the interests of equity and efficiency. In 1978 the previous Government announced that it would introduce such a system but in the face of criticism from certain quarters, the measure was abandoned. Such criticism overlooks the fact that foreign tax credit systems are common in developed countries-American, West German and Japanese firms, amongst others, have extensive overseas operations despite being subject to such systems in their home countries. The direct gain to revenue from this measure is estimated at about $60 million per annum at 1985-86 levels of income, with the first revenue gains accruing in 1988-89. In the longer run, however, the revenue gains could be substantially greater if followed up with initiatives against offshore tax avoidance activities which would be based on the foreign tax credit system framework. I turn now to the details of this measure. The new system will first apply to assessments in respect of the year of income commencing on 1 July 1987. Under it, all foreign source income derived by Australian resident taxpayers-apart from certain salary and wages that I will mention shortly-will be subject to Australian tax, and a credit will be allowed against that tax for analogous foreign tax paid on that income. Except for certain interest income derived overseas, foreign source income will be assessed on a worldwide basis. This approach will enable excess foreign tax credits from high-tax countries to be offset against Australian tax on income from low-tax countries. Foreign tax on the foreign income of an Australian company will be creditable against its Australian company tax on that income, but not against compensatory tax that will be payable as part of the proposed imputation arrangements. Credits for foreign tax will be set against company tax before compensatory tax offsets company tax. An Australian company receiving dividends from subsidiaries overseas will be allowed credit for underlying foreign company tax on the profits from which the dividends are paid, as well as for any foreign withholding or other tax imposed on the dividends. The credit for underlying tax will be allowed for unlimited tiers of subsidiary companies provided that each company in the chain has a 10 per cent controlling interest in the company immediately below it, and the Australian parent has a direct or indirect interest of at least 5 per cent in the voting shares of each company. As part of this mechanism, dividends received by an Australian parent from an overseas subsidiary will be treated as being first paid out of a pool of the subsidiary's accumulated profits. This pooling approach, which is of an anti-avoidance nature, will apply on a prospective basis, and any dividends in excess of the pool will be treated as paid out of the subsidiary's profits of earlier years on a last-in-first-out basis. The measurement of income for overseas branches or other overseas business, commercial or investment activities of Australian taxpayers will be determined in accordance with Australian income tax law. For subsidiaries, book profits as disclosed in the accounts of the company will be used, with scope for these to be adjusted where that is appropriate. Overseas branches of Australian life insurance companies will be taxed, under the new system, only on income remitted to Australia and not on all branch profits. The Bill contains currency exchange conversion rules that are to apply to convert various categories of foreign income to Australian dollars for Australian tax purposes. Salary and wages earned overseas by an Australian resident and liable to tax in the country of source are to be fully exempt from Australian income tax where derived in performing service overseas for a continuous period of at least 12 months. A proportionate exemption will apply where the period is from 3 to 12 months, with a credit being allowed for foreign tax paid on any amount not exempted. These provisions will not affect persons working overseas on approved projects to whom a specific exemption in the present law will continue to apply. However, the foreign earnings of such persons, as well as salary and wages earned overseas that is to be exempted on the basis I have just outlined, will be taken into account in calculating Australian tax on other income derived by a taxpayer, so that exemption of the foreign earnings will not also reduce the Australian tax payable on that other income. In most cases, the taxation treatment of foreign pensions received by Australian residents is governed by the terms of an existing double taxation agreement, and this position will not be altered by the foreign tax credit system. The new system will therefore apply only to foreign pension income in the limited number of cases where pensions are derived from non-treaty countries. As an anti-avoidance measure, certain foreign source interest income is to be assessed separately from other income, with separate tax credit limits. Because of arrangements that might be designed to avoid this interest quarantining, dividends received from foreign subsidiaries will under certain circumstances be traced to determine whether interest income has been recharacterised and remitted to Australia as dividends. Where necessary, dividends will be apportioned into an interest income component and other income, with foreign tax credits being allowed separately on each component. Interest earned in carrying on normal business activities and interest received by banks and other financial institutions will be excluded from the quarantining process. Although the Government has decided not to treat other forms of passive income in a similar way to interest, the position will be monitored to see whether there is a need to widen the quarantining measures. Under the Bill, losses incurred in any year in respect of an overseas branch operation or other particular business, commercial or investment activity will not be offset against domestic income in the same year, nor against other foreign source income, but will be available for offset against profits derived in any of the seven succeeding years from the same branch or activity. Taxpayers will have the option to carry-forward domestic losses for offset against later domestic income as at present or to offset them against foreign income. Excess foreign tax credits will not be able to be carried forward or back, but will be transferable within wholly owned company groups for set-off against Australian tax payable on other non-interest foreign income derived by another group company in the same year of income. The Bill also contains measures to recognise selected taxation incentives of a developing country. In the absence of special measures-called tax sparing relief-a foreign tax credit system can negate incentives in the form of tax holidays or tax reductions offered by developing countries to encourage foreign investment to assist in the development of those countries. Tax sparing relief is traditionally granted in the context of a comprehensive agreement for the avoidance of double taxation between the two countries concerned. Australia has followed this approach, but the Bill will also enable tax sparing to be granted on a country by country basis by regulations made for that purpose. Where tax sparing is granted in respect of income from a particular country, either by way of regulation or under the terms of a comprehensive taxation agreement, the tax forgone by the foreign country under the relevant taxation incentive measure will be deemed to have been paid by the Australian taxpayer before arriving at the income received. The taxpayer will therefore be entitled to a credit for the foreign tax forgone in respect of the relevant foreign income. Finally, in giving effect to the general foreign tax credit system, it is also necessary to remove from the income tax law those double taxation relief provisions that the new system will replace. To this end, the Bill will repeal the existing foreign tax credit provisions that apply to foreign dividends received by individuals, to most classes of income derived from Papua New Guinea, and to foreign source interest and royalties subject to limited tax rates under Australia's comprehensive tax treaties. It will also repeal existing provisions that exempt from Australian tax various categories of foreign income that will become subject to the new system. For the same reason the Bill will withdraw, in relation to foreign source dividends, the rebate provided by section 46 of the Income Tax Assessment Act that now effectively exempts such dividends from Australian tax. An issue that the Government has under notice in the light of representations is whether to extend the capital expenditure deductions for mining companies to such expenditures on overseas projects. A decision will be announced as soon as practicable. A technical explanation of the provisions of this Bill is contained in an explanatory memorandum being made available to honourable senators. I commend the Bill to the Senate. TAXATION LAWS AMENDMENT BILL (No. 2) 1986 This Bill will amend the income tax law in two major respects. It also contains several other amendments of the taxation laws. The principal measures to which it will give effect are the proposals announced by the Treasurer in December 1984. The first of these was to tax each year the income accruing to resident taxpayers from discounted, deferred interest and capital indexed securities. The other was to strengthen the interest withholding tax provisions in relation to such securities held by non-residents, and other non-traditional financing arrangements. The Bill will also exempt from tax certain allowances paid to recipients of the new Commonwealth Formal Training Allowance. A technical defect in the rebate provisions of the income tax law that apply to certain employment termination payments is to be corrected. The Income Tax Secrecy Provisions are to be amended to enable information concerning superannuation funds, approved deposit funds and similar funds to be conveyed to persons who may be responsible for supervision of the superannuation industry. And finally, the Bill will amend the Income Tax Gift Provisions and make a number of purely technical amendments relevant to the recent changes to the Repatriation Laws. I turn now to discuss in more detail the measures contained in the Bill. Discounted and other Deferred Interest Securities In December 1984 the Treasurer announced the Government's decision to adopt a new method of taxing income accruing on certain non-traditional securities on which some or all of the income yield is accumulated and paid only at maturity. The gain to an investor from holding such securities is income that is akin to interest, and is taxed under the present income tax law only on redemption of prior sale of the instruments. That deferral of tax gives rise to effects on budgetary revenue and advantages investors in those securities by comparison with investors in traditional securities having the same nominal before-tax yield. These revenue and market effects are undesirable, and the income tax law is to be changed to correct that situation by taxing the overall yield on non-transitional securities on a basis broadly comparable to the way in which income derived from traditional securities is taxed. Amendments contained in this Bill will ensure that income that is compounded or accrued in each year from a discounted or other deferred interest security will be taxed in that year to the investor. This accruals basis of assessment will apply to the holder of an affected security whether it was acquired on issue or by purchase in the secondary market. A gain arising from the sale of an affected security for more than its accrued value will be included as assessable income of the vendor, while a loss on sale will be an allowable deduction. With certain exceptions the securities to which these particular measures will apply include original issue discount securities, interest-at-maturity securities, and securities (such as Dingo Bonds) which separately market the entitlements to principal and interest on underlying securities. However, such securities will only be subject to these measures if they were originally issued after 16 December 1984 with a term exceeding one year and where, at the time of issue, the deferred yield on the security can be ascertained and, for each year in the term of the security, exceeds 1.5 per cent of the redemption price. Securities of the indexed capital type or those where the yield to redemption cannot be determined on issue will be subject to other measures contained in this Bill, provided they were also issued after 16 December 1984 for a term exceeding one year. In these cases, the assessable income of the investor in any year will include the actual increase, by indexation or otherwise, in the accrued value of the security during the year, as well as any interest actually derived during that year. Where these kinds of affected securities are also issued or purchased at a discount, the discount will be included in the holder's assessable income in a straight-line basis over the period the security is held. This will be based on the term, or the remaining term, as the case may be, of the security. If such a security is purchased on the secondary market at a premium over its accrued value, the premium is to be allowed as a deduction on the same basis. The accruals basis of assessment will not apply to relevant securities held by non-residents or forming part of a taxpayer's trading stock. Subject to certain exceptions, issuers of affected securities will be allowed deductions each year for the discount or other interest component calculated on a basis similar to the assessable income of the investor. The exceptions, which are of an anti-avoidance and revenue protection nature, are securities issued after 22 May 1986 offshore or payable to bearer. Deductions in those cases will continue to be allowed in the year in which the discount or deferred interest is actually paid. By bringing forward the taxing point of income on these securities, the arrangements I have outlined will redress the tax deferral advantages of such securities. This will result in some unquantifiable gains to revenue. Interest Withholding Tax I turn now to the proposal also announced by the Treasurer in December 1984 to strengthen the interest withholding tax provisions of the income tax law. In recent years, there has been a move away from the more conventional means by which overseas finance is provided. This has been with the aim of avoiding the non-resident lender's liability to Australian withholding tax. Some of the arrangements involve the use of discounted and other deferred interest securities, including capital-indexed securities of the kind I have just spoken about. A typical arrangement involves securities which, instead of being held by a non-resident until redemption-at which time withholding tax would apply to the payment of the discount or deferred interest-are sold to a resident just prior to maturity. This means that, while the resident purchaser is usually liable to tax on the excess of the redemption price over the purchase price, the balance of the discount, which effectively passes to the non-resident as part of the proceeds from the sale of the security, is not subject to withholding tax. Further, the arrangements are often structured so that the profit has an ex-Australian source. In these cases the profit derived by the non-resident cannot be taxed by assessment. The proposed amendments will overcome this avoidance technique by ensuring that the tax will apply to the difference between the sale price of the security and its issue price. Where a non-resident vendor has purchased such a security from a resident of Australia, the Bill provides that the withholding tax liability may be adjusted to bear only on the difference between the sale proceeds and the purchase price. This measure will apply to relevant debt obligations and securities issued after 16 December 1984 irrespective of their term but, subject to certain safeguards, will only affect payments made on or after the date the Bill becomes law. Techniques that result in the avoidance of interest withholding tax include hire purchase and similar contracts, such as `terms purchase' and `lease with option to purchase' arrangements. The charges under these arrangements have not, in the past, been classed as interest for withholding tax purposes, although they are, in reality, the reward for the provision of finance. Again, because the arrangements do not enable an Australian source to be attributed to the charges, the non-resident `lender' is not subject to tax by assessment. The Bill will amend the income tax law to bring hire purchase and similar charges-that is, the excess of total payments over the cost price of the goods-within the scope of the interest withholding tax provisions. This amendment will also apply to contractual obligations entered into after 16 December 1984 but, again subject to appropriate safeguards, only in relation to relevant payments made on or after the amendment becomes law. The Bill will also remove doubts that may exist about the application of the interest withholding tax provisions to certain payments made in relation to bank accepted bills of exchange. It is not altogether clear whether withholding tax is payable on the discount element of a bank accepted bill where a resident indemnifies or reimburses a non-resident acceptor for the face value of the bill at maturity. This is to be compared to the situation where, if the resident drawer of the bill had met the face value of the bill directly, withholding tax would clearly be payable on the discount. The Bill will clarify this by specifying that withholding tax is to be payable on any amount or amounts that constitute the discount or interest factor under a bill of exchange. Similar provisions are contained in the Bill in relation to promissory notes. These provisions will only affect payments made in respect of bills of exchange and promissory notes drawn or issued after the amendments receive the royal assent. These changes will prevent a continued loss of revenue of an unquantifiable amount. Allowances for Job-seekers On 19 December 1985, my colleagues, the Minister for Employment and Industrial Relations and the Minister Assisting the Prime Minister for Youth Affairs, announced the introduction, from 1 January 1986, of a new system of Commonwealth training allowance. The new allowance, called a formal training allowance, has a single age-related structure and is consistent with the aim of the Government's priority one strategy in improving education and training opportunities for young people. The formal training allowance includes a living component which is equivalent to the social security pension or benefit entitlement for which a trainee may otherwise have qualified. Recipients of social security pensions or benefits who are paid allowances because they have a dependent child, live in a remote area or require rent assistance, are exempt from tax on those allowances. So as not to disadvantage persons in receipt of the formal training allowance, an amendment proposed by the Bill will exempt from income tax those allowances that may be paid to trainees that correspond with the non-taxable allowances paid to social security pensioners or beneficiaries. An associated amendment will ensure that taxable payments of trainees are subject to regular pay as you earn tax instalment deductions. The estimated cost to revenue of this measure is $100,000 in 1986-87 and $200,000 in a full year. Employment Termination Payments Rebate The Bill will give effect to the proposal announced on 11 March 1986 to remove an unintended effect of the income tax rebate provisions that limit the rate of tax payable on certain payments made on termination of employment. Those payments are lump sum superannuation and kindred payments that relate to service after 30 June 1983 and most lump sum payments in lieu of accrued annual leave and long service leave. The rebate provisions limit the rate of tax on such payments to no more than 30%. In the case of the first $55,000 of relevant lump sum superannuation and kindred payments made to a taxpayer aged 55 or more, the rate is limited to a maximum of 15%. However, a technical defect means that the provisions may not always allow the full benefit of the rebate where some part of the payments is subject to tax at the lowest marginal rate of 26.67% for 1984-85 and 25% for 1985-86. Amendments contained in the Bill, which will first apply for 1984-85, will correct that defect. The amendments are not expected to have any significant effect on revenue. Income Tax Secrecy Provisions At present, because associated exemptions and deductions are dependent on compliance with various provisions of the income tax law, the Commissioner of Taxation is largely responsible for the regulation of superannuation and similar funds. The suggestion is made from time to time that the non-revenue aspects of fund regulation should be the responsibility of someone other than the Commissioner and the Government has that possibility under consideration. Any transfer of this responsibility would, of course, occur only after consultation with appropriate representatives of employer and business groups, the ACTU and the Superannuation Industry. If it is decided to transfer responsibility, it is most likely to be given to the Department of the Treasury or to a new Supervisory Authority. In either event, it is anticipated that any decision in that regard would be taken prior to the Budget sittings. Therefore, this Bill-the last relevant Bill scheduled for passage during the current sitting of the Parliament-proposes the amendment of the Income Tax secrecy provisions to permit the Commissioner of Taxation to communicate information to either the Secretary to the Treasury or any new authority for the purposes of carrying out any transferred functions. The proposed amendment will have no revenue impact. Gifts The gift provisions of the Income Tax law are being amended by the Bill to make gifts to the Pearl Watson Foundation tax deductible. The Pearl Watson Foundation was established to commemorate the considerable contribution to the Australian community of Pearl Watson, the late wife of Mr Justice R. S. Watson of the Family Court of Australia. As honourable senators will be aware, Mrs Watson died tragically in a bomb explosion at her home on 4 July 1984. The Foundation promotes education and information programs in areas such as marital breakdown, family law, and marriage counselling and conciliation services. Deductions will be allowable for gifts, the value of which is $2 or more, made after 22 May 1986. The cost to revenue of this measure is estimated at less than $10,000 in a full financial year. Finally, the Bill will make formal amendments of the Income Tax Assessment Act made necessary by changes contained in the recently enacted Veterans' Entitlements Act 1986. A comprehensive memorandum explaining in detail the measures that I have outlined is being made available to honourable senators. I commend the Bill to the Senate. INCOME TAX (SECURITIES AND AGREEMENTS) (WITHHOLDING TAX RECOUPMENT) BILL 1986 This Bill will formally declare and impose tax, at a rate equal to the amount of withholding tax avoided, in two particular situations. The broad effect of one of the measures contained in the Taxation Laws Amendment Bill (No. 2) 1986, about which I have just spoken, is to subject to withholding tax the profit derived by a non-resident from selling a qualifying security to a resident prior to its maturity. As a safeguard against arrangements designed to avoid or minimise the effect of these provisions-for example, by the sale of a security for less than its market or arm's length price-the Commissioner of Taxation will be authorised to adjust the sale price of the security to the price at which it would have been transferred by persons dealing at arm's length. As it will be not generally be possible to collect the withholding tax avoided in these kinds of arrangements from the non-resident, the tax imposed by this Bill will be payable by the resident transferee. I also indicated in my earlier speech that, subject to appropriate safeguards, withholding tax would not be payable in relation to payments subject to the new measures made on or before the amending legislation becomes law. Those safeguards are designed to prevent arrangements under which interest that would normally be payable on and after the date on which the legislation receives the royal assent is in effect prepaid before that date. Where the Commissioner of Taxation ascertains that such prepayments have occurred for the sole or dominant purpose of reducing the withholding tax otherwise payable, the person who made the payment is to be liable to pay the amount of withholding tax sought to be avoided. This Bill will also impose that amount of tax. I commend the Bill to the Senate. TAXATION BOARDS OF REVIEW (TRANSFER OF JURISDICTION) BILL 1986 This Bill reflects in large measure the Government's response to recommendations made in a report by the Administrative Review Council entitled ``Review of Taxation Decisions by Boards of Review''. It proposes that, with minor departures, the recommendations of the Administrative Review Council be adopted. In accordance with the council's recommendation, the principal function of the Bill is to abolish the Taxation Boards of Review and transfer the present jurisdiction of the boards to the Administrative Appeals Tribunal. The changeover is to take place on 1 July 1986. The present avenue of appeal under some taxation laws to a Supreme Court will remain. The Bill also contains amendments of the sales tax law to give further partial effect to the decision of the former Government, adopted by us on coming to office, to revise the objection and appeal provisions of that law. Other provisions in the Bill will make further amendments of the objection and appeal provisions of the various laws administered by the Commissioner of Taxation with a view to achieving a degree of desirable uniformity. Finally, the opportunity is being taken to repeal some Acts that are no longer operative. Mr President, I turn now to the more important features of the Bill. Taxation Boards of Review In deciding to accept the Administrative Review Council's recommendation, the Government was concerned to ensure that the complex and exacting task of reviewing taxation decisions was undertaken by persons with a high level of expertise in, and specialist knowledge of, the taxation laws. A notable feature of this Bill, therefore, is the creation, within the Administrative Appeals Tribunal, of a separate division to review taxation decisions. This new division is to be known as the Taxation Appeals Division. Members of the Tribunal will be assigned to the Taxation Appeals Division after consultation between the Treasurer and the Attorney-General. The separate division will ensure that the review of taxation decisions is undertaken by tribunal members having knowledge and skill relevant to that function. Those of the existing Taxation Board of review chairman and members who so wish are to be appointed to the Administrative Appeals Tribunal as senior non- presidential members and assigned to the new Taxation Appeals Division. Additional full-time and part-time members will be appointed as appropriate. I emphasise that the high standards set by the taxation boards of review over the past 60 years and the informal review procedures of the boards will be maintained by the Taxation Appeals Division of the Tribunal. Under the more flexible procedures of the Administrative Appeals Tribunal, a tribunal may, however, be constituted by a single member, although a 3-member tribunal may also sit, as the occasion requires. A substantial backlog of requests for review by the taxation boards of review has developed in recent years, primarily as a consequence of the tax avoidance boom of the mid-1970's and early 1980's. The extra hearing capacity provided by these more flexible procedures should enable this backlog to be dealt with more quickly than would otherwise be the case. There is to be some modification, in relation to taxation reviews, of existing administrative appeals tribunal procedures. Requests to have decisions of the Commissioner of Taxation reviewed by the Administrative Appeals Tribunal will, as recommended by the Administrative Review Council, be sent in the first instance to the Commissioner who will refer them on to the Tribunal. This procedure will enable decisions to be re-examined by the Commissioner before they are referred to the Tribunal for review. Another departure from the usual practice of the Administrative Appeals Tribunal will be that all taxation review proceedings are to be conducted in private, unless the taxpayer requests a public hearing. This follows the existing practice of the Boards of Review and is consistent with the principle that the taxation affairs of people are matters that ought to be kept confidential. Also in keeping with this principle, decisions of the Taxation Appeals Division of the Tribunal will, like decisions of the Taxation Boards of Review, be prepared so as to ensure that, on publication, the identity of the taxpayer concerned is not revealed. As recommended by the Administrative Review Council, the Administrative Appeals Tribunal Act is to be modified so that taxpayers will not, in the first instance, be able to obtain from the Commissioner of Taxation statements of reasons for decisions disallowing objections. However, at the time a matter is referred to the Tribunal, the Commissioner will provide to the Tribunal a statement of reasons for the disputed decision and the Tribunal would make available to the taxpayer a copy of those reasons. As a resource saving measure and to assist in making inroads into the backlog, the documents and a statement along the lines of those presently made available to the Taxation Boards of Review will be provided until 30 June 1988. After that date the more detailed reasons and documents required under the Administrative Appeals Tribunal Act will be provided to the Tribunal. Under the Administrative Appeals Tribunal Act, the Attorney-General on behalf of the Commonwealth, or any other person whose interests are affected by the disputed decision, may intervene in a proceeding before the Tribunal. The Bill will modify the operation of the Administrative Appeals Tribunal Act so that, consistent with the principle of confidentiality in taxation matters, the taxpayer concerned will have to consent to the joining of outside parties-other than the Attorney-General-in proceedings before the Taxation Appeals Division of the Tribunal. While the right of the Attorney-General to intervene will extend to Taxation Review proceedings, I make it clear that it is the Government's intention that such intervention would occur only where an important question of public interest not concerning an interpretation of the taxation law is involved or where the interpretation of the provisions of the Administrative Appeals Tribunal Act is an issue. Matters relevant to intervention by the Attorney-General could be dealt with separately to the review of the disputed decision. In keeping with long-standing provisions of the taxation law, neither the Administrative Appeals Tribunal nor the Federal court will have power to prevent or restrain the collection and recovery of tax where an objection decision is subject to review by the tribunal. All modifications of the Administrative Appeals Tribunal Act in respect of taxation review proceedings are to be enacted in a new part of the Taxation Administration Act. Subject to transitional arrangements mentioned later, appeals from an Administrative Appeals Tribunal decision on a question of law will be to the Federal Court. The Government has also decided to extend the appeal rights of taxpayers in certain respects. The Administrative Appeals Tribunal and the Supreme Court are to be given a discretion to permit a taxpayer to widen the grounds of objection in appropriate cases. In addition, the Commissioner of Taxation will be permitted to extend the time in which an objection may be lodged. A refusal by the Commissioner to grant an extension of time will be reviewable by the administrative appeals tribunal. Consistent with allowing extensions of time for lodgment of objections, the Administrative Appeals Tribunal and the Supreme courts are also to be given authority to grant an extension of time in which a taxpayer can request the Commissioner of Taxation to refer an objection decision to those bodies. Transitional Arrangements Transitional provisions will apply to requests for reference to a taxation board of review that are awaiting referral by the Commissioner of Taxation at 1 July 1986. Special rules will also apply to references at the boards awaiting hearing or decision. Requests that have not, at the changeover date, been transmitted to a board of review will be treated as requests for review by the Administrative Appeals Tribunal. These will be referred to that tribunal by the Commissioner. Cases with a board of review at the changeover date where a hearing has not commenced, will be treated as being with the tribunal. These will be reviewed by the Taxation Appeals Division of the Tribunal under the new arrangements. In these situations an appeal from the Administrative Appeals Tribunal will, in accordance with the procedure under its enabling act, be available to the Federal Court on a question of law. Where, at the changeover date, a board of review has commenced,or completed, a hearing but no decision has been given, the continuation of the hearing or the decision will, where practicable, be by the Tribunal constituted by one or more of the former members of that board of review. This will be deemed to be a proceeding by, or decision of, the Administrative Appeals Tribunal. Such cases will be appealable to the Federal Court where a question of law is involved in the decision. This means that the appeal may be by way of a fresh hearing before that court. The $2 fee presently payable by a taxpayer before a reference or appeal is forwarded to a Taxation Board of Review or a Supreme Court is to be abolished. Fees paid in all cases undecided at the changeover date are to be refunded. The transfer of tax jurisdiction to the Administrative Appeals Tribunal will have no direct revenue consequences although, to the extent that the Tribunal is able to reduce the backlog of review requests, there could be some earlier settlement of taxation debts. Sales Tax The opportunity is being taken by this Bill to give further partial effect to the decision of the former Government-adopted by us on assuming office-to revise the sales tax objection and appeal provisions. Amendments in the Bill will bring the objection and appeal provisions of the sales tax law into line with the comparable income tax provisions. Sales taxpayers will have a right of objection and review in all cases where a liability for sales tax exists. In particular, they will from 1 July 1986 have the option of having decisions on the classification of goods and the refund of tax reviewed by either an administrative tribunal or a Supreme Court, instead of resorting to the unwieldly and inappropriate procedure of defending a recovery action before a court. Objections, Reviews and Appeals By this Bill, further amendments are to be made to the objection and appeal provisions of the various taxation laws administered by the Commissioner of Taxation to correct some deficiencies and achieve a degree of uniformity. Under the various taxation laws the right of objection against an amended assessment is intended to be limited to matters connected with the particular item that is the subject of the amendment. The Federal Court of Australia has decided, however, that the relevant provision of the income tax law imposes a monetary, but not a subject matter, limit on an objection against an amended assessment. This decision could apply to the detriment of the revenue in some circumstances. It may also unfairly restrict a taxpayer's right of objection in other cases. Amendments proposed by this Bill are designed to restore the law to its intended effect. As a result of amendments enacted in 1984, most taxation laws provide for an assessment of additional penalty tax payable by a taxpayer. To simplify the objection and appeal procedure, assessments of additional tax and ordinary tax incorporated on the same assessment notice are to be treated as one for the purposes of the objection and appeal provisions. Only a single objection or request for review will need to be made to cover the entire tax liability. Under its newly acquired jurisdiction to review taxation decisions, the Administrative Appeals Tribunal will have the power to affirm, vary or set aside decisions of the Commissioner of Taxation on objections. Further amendments being made by this Bill will make it clear that the Supreme Courts will likewise only be authorised to make orders in relation to objection decisions. The Commission will be required to give effect to decisions of the Tribunal or a court within 60 days after they become final. To bring the objection provisions into line with provisions relating to requests for review of appeal, other provisions of the Bill will provide that objections must be lodged with, and not merely posted to, the Commissioner of Taxation within the specified time limit. This time limit, which as earlier mentioned will be capable of enlargement, will be uniformly extended so that a limit of 60 days applies to both objections and applications for review or appeal under all taxation laws. Other amendments will enable persons who have requested reference of an objection decision to the Tribunal or a Supreme Court to give notice to the Commissioner to refer the matter to the tribunal or court within 60 days. This will bring all taxation laws into line with a comparable provision in the income tax law. Redundant Acts Finally, several taxation laws that the Commissioner of Taxation administered and which are no longer operative are to be repealed. An explanatory memorandum comprehensively explaining the features of this Bill is being circulated for the information of honourable senators. I commend the Bill to the Senate. Senator MESSNER(South Australia)(5.48) —I would like, firstly, to deal with several matters before coming to the foreign tax credits system which is the main part of this group of allied Bills. I draw the Senate's attention to the Taxation Laws Amendment Bill (No. 2) 1986 and, in particular, to clause 4 of that Bill. The Opposition has no general problem with other parts of the Bill. However, we do have major objection to clause 4 and we will be opposing that clause in the Committee stage. This Bill appears to open up a new procedure within the Australian Taxation Office which deserves some very considerable comment. As all honourable senators would know, there are very stringent secrecy provisions which bind the Commissioner of Taxation from revealing information about the affairs of taxpayers to any person or any government agency except for those which are specified in section 16 of the Income Tax Assessment Act. Clause 4 provides that there will be a provision of information by the Taxation Commissioner to the Secretary to the Department of the Treasury for certain purposes. The purposes are referred to as being those in connection with the supervision or regulation of provident, benefit, superannuation or retirement funds. The point that is concerning the Opposition in this regard is quite obvious. First, there is a breach of the well-accepted principles of secrecy when it comes to the affairs of taxpayers. Secondly, there is a provision that the information, otherwise secret, can be made available to the Secretary to the Treasury in respect of the supervision and regulation of superannuation funds when we have no idea what the nature of that regulatory machinery might be. This brings us back to the arguments in the community now about the establishment of superannuation funds right across the community. We recall the recent debates about the union-based superannuation funds and their extension into the community. In fact, as I understand it, this is a matter which is before the Conciliation and Arbitration Commission at this very time, with there likely to be a decision, known as a productivity grant, in favour of the establishment of superannuation funds. The point is that the opening up of this secrecy power seems to us to deserve further consideration by the Parliament, because quite simply the Government has not told us who finally will have access to the information. Clearly, if the Government is going to provide for some new supervisory or regulatory machinery for superannuation funds, I for one-and the Opposition supports this view-would not be prepared to open up the powers of the Taxation Commissioner to breach the long-standing principle of secrecy without knowing what that machinery is going to be. It seems quite clear that in the present climate, in which superannuation funds are likely to be subject to pressure from the trade union movement, and as superannuation, on union-based principles, gains momentum, there will no doubt be very considerable pressure on government agencies to provide information from the various superannuation funds currently lodging taxation returns with the Taxation Office. If a regulatory authority is established, as no doubt it might be, with representative membership of the top body-for want of a better phrase, the board of directors-combining the interests of people from the trade union movement, from employer groups and so on, those people may have access to the secret information of superannuation funds. I think that that would be a matter for great concern. Consequently, we in the Opposition will be opposing that clause until we have a better picture from the Government as to what it intends to do about the establishment of a proper regulatory agency for the supervision of superannuation funds. The next Bill I would like to mention is the Income Tax (Securities and Agreements) (Withholding Tax Recoupment) Bill 1986. We have no particular objection to that piece of legislation. I turn now to the Taxation Laws Amendment (Foreign Tax Credits) Bill 1986 and indicate immediately that the Opposition will be opposing the legislation at all stages, as announced on 12 November 1985. The proposed foreign tax credits system seeks to tax in Australian residents' hands all income which has a foreign source. That income is to be taxed at Australian rates. The object of the legislation is to allow credits for the tax paid in respect of that foreign sourced income in the country of its origin. When initially announced in September last year, the Treasurer (Mr Keating) said that indeed the credits that would be allowed to companies in that situation would be allowed only on a country by country basis rather than on a worldwide basis. Obviously this would have considerable impacts as no doubt there would be variations in treatment between various countries and Australia. I compare low company tax countries such as Singapore or Hong Kong, with company tax rates of 18 per cent, with very high company tax rate countries such as those in Western Europe. The difference of treatment might mean that companies would not be able to offset surpluses that were not taken up against Australian taxes against deficits from other countries in similar situations. As a consequence, there was some very considerable objection on the part of business to that concept of operating a foreign tax credits system. It is pleasing to see, notwithstanding that we oppose this measure, that the Government has changed the system so as to allow for a worldwide taxation system to apply. Turning to our arguments against this system in principle, I believe that probably one major argument goes to the core of our concern. It is pretty clear that Australia's economy is in very considerable retreat. This is notwithstanding the long period over which the Government has been claiming the reverse. In fact, it has been claiming over many months that the economy has been getting better and better and that jobs are being created. We find now that indeed we are looking down the barrel and seeing considerable problems ahead. It seems to me to be quite reasonable that if we are, as we should be, seeking to develop alternative markets for Australian products, we should be looking to those areas of the world near to us in which to develop those markets. Quite clearly we are thinking of the Pacific region and South East Asia. Clearly that is the area we should be developing our relationships with and seeking to do more business with. Many Australian companies already have done that and, in fact, have established branches and/or subsidiaries which are operating, for example, in the Philippines, Korea, Thailand, Malaysia, Indonesia, and so on. Obviously, seeking to extend the expertise of Australian businessmen and Australian investors to develop Australian interest in those areas and to earn profits which can be repatriated to Australia is a worthwhile objective. Of course, many of those countries are low tax countries by the standards of Australia. Indeed, many of them in fact are the sorts of countries which provide enormous opportunities for the future development of Australian companies. That surely is a way not only of developing Australia's foreign image abroad, which is very important in terms of Australia's role in this area of the world, but also of providing a hedging, if you like, by giving Australian companies the opportunity of earning alternative profits and not having to rely on the very small domestic market of 16 million people in Australia. We have access to markets which represent literally hundreds of millions of people in these areas and which are developing rapidly both in affluence and in their capacity to develop technology. Surely that offers tremendous opportunities for Australian companies. We can see the foreign tax credit system, as the Government proposes, working against the interest of those companies seeking to establish themselves overseas. Taxing all foreign-sourced income at Australian rates will mean that the tax rate will rise for Australian companies operating overseas. This will be a permanent and very destructive disincentive for people and companies to invest overseas. The obvious answer to many Australian companies will be to say: `We have the Australian market of 16 million people, but we have markets of billions of people nearby. Maybe a better answer is that we pack up and establish ourselves overseas altogether and pay tax at the local rates which apply in countries such as the Philippines and Thailand, and in that way avoid the impact of the Australian higher rate of company tax'. That is likely to occur as a result of the introduction of this legislation. Consequently, we can see that this will not only be a major destructive incentive but also it will be very destructive of Australian industry generally. It could happen that companies, which are operating both in Australia and overseas, will decide to hold profits offshore instead of repatriating profits which would otherwise come to Australia. As a result, those profits will not find their way back into Australia and become the bases of further investment and support for activities in other parts of the world but not in Australia. That sounds like quite a silly proposition when we are seeking to develop the Australian economy to the degree that we are, or need to do, at this time. By introducing a system such as this, the Government thinks that we will somehow overcome the problems of some companies perhaps less scrupulous than others which seek to utilise the so-called tax havens operating in some parts of the world. That seems to me-if that is an intention-to be totally ineffective because it will be in the interests of those companies which choose to do that type of thing to make sure that the Australian taxation authorities do not become aware of that kind of operation. Consequently, we will never know of those profits which are being stored offshore in foreign tax havens. This will be ineffective in bringing down that aspect of tax avoidance which could be a very large area in the operation of Australian companies. The major point has to be made: Australia is still very much a country dependent upon the import of capital and we should be encouraging companies which are seeking to hedge their bets by spreading their markets broader than just in Australia to repatriate their profits so as to make sure that there is an even flow of capital back to Australia. This tax measure will have the opposite effect: Companies will have a positive incentive to go offshore, instead of developing alternatives overseas and repatriating those profits. It is hard to see that that is a very sound measure in today's world. The Opposition does not believe that this is a reasonable proposition, and consequently we will be opposing the matter at all stages during the debate in the Senate. I turn now to the Taxation Boards of Review (Transfer of Jurisdiction) Bill 1986. We have considerable doubts about the changes we were discussing a moment ago in connection with the assessment procedures for taxpayers as announced by the Taxation Commissioner. I mentioned that it is a pity that we could not, at that stage, have debated those assessment changes with the changes which are now being proposed for the transfer of the boards of review of taxpayers' appeals, which currently operate within the Australian Taxation Office, to the Administrative Appeals Tribunal. We see a need to improve the performance of the boards of review in the Taxation Office because obviously a considerable backlog of cases is clogging up the system at the moment. I am told that at present there are something like 90,000 outstanding cases in the boards of review. This would mean that it would take some years before those cases could all be heard. Consequently, there will be very significant delays in people receiving justice. We welcome some of the proposals which are incorporated in this legislation and believe they are good steps towards the improvement of the operation of the appeals system. For instance, the establishment of single member tribunals must speed up the work rather than having to rely on tribunals of three to hear cases which is the present system. Other streamlining methods being undertaken will also assist in speeding up the process of handling the backlog of cases. We have no objection to that at all. Our concerns are in more general terms and are related to how the new boards of review will work within the framework of the Administrative Appeals Tribunal. All of us know that that has very considerable jurisdiction across the gamut of the Repatriation Appeals Tribunal, the Social Security Appeals Tribunal and many other matters affecting government administration. The addition of new tribunals to the Administrative Appeals Tribunal which will arise from the transfer of boards of review will add significantly to the problems of administration of the AAT. We are worried about that aspect for a start. Quite apart from that, a couple of points in the legislation worry us, and at some later stage the Minister may be able to help us understand those points. For instance, why is it that the Taxation Commissioner will not now be required to provide the reasons to the taxpayer for rejecting an appeal at the board of review level? I note that there will be a requirement that the Taxation Commissioner will have to provide those reasons to the Administrative Appeals Tribunal. But that surely is a different kettle of fish because the taxpayer will not have access to those reasons. Another point mentioned in the second reading debate which is of some concern is that in the hearings of the Administrative Appeals Tribunal the Attorney-General will have a power of intervention albeit at the request of the taxpayer-I will return to that point in a moment-in matters of so-called public interest. We all know how far that public interest can extend. It would not appear to me to be just or fair to taxpayers who upon the Tribunal's request should invite the Attorney-General to come to speak in their case and give evidence in the public interest, which would amount to giving evidence against the taxpayer. There seems to be an air of unreality about that. If I am misunderstanding the point that the Government is making, I would be only too pleased to have the Government point that out to me. However, it seems that that situation could lead to the very unfortunate position that the rights of taxpayers could, in effect, be very seriously curtailed and affected by the intervention of the Attorney-General. That situation, of course, did not apply, as I understand it, in the case of the old boards of review that operated under the tax law. To that extent, there is to be a serious change in the legislative framework and the way in which the legislation will affect taxpayers' rights. We are concerned about the proposal to move from boards of review to the Administrative Appeals Tribunal because essentially-this is really the essence of our problem with this matter-we see that as a change from what is an effective informal system, under which people can have their appeals heard within the present framework of the Australian Taxation Office, to what is obviously a more legalistic and formal system of appeals operated within the Administrative Appeals Tribunal. When it is all boiled down, that is where our concern lies. Many people such as lawyers and accountants who practise in the tax jurisdiction seem to support that point of view. I must say that, generally speaking, the moves to streamline the procedures appear to be welcome. However, we are concerned about the move from a system that I think has been well regarded-albeit a slow system under which it is difficult to get one's case cleared up quickly but one which provides an effective informal release which perhaps will not be available in a legal body such as the Administrative Appeals Tribunal. We also note and recognise-perhaps this is a step forward-that, in future, appeals will be made to the Federal Court and not, as is the case now, to the supreme courts in the various States. That may or may not represent a curtailment of the rights of taxpayers. However, it is a matter of some interest in the general community. Finally, I return to my first point, namely, that these changes together with the proposal in the Taxation Laws Amendment Bill 1986 to change the system of assessment to one of self-assessment by taxpayers, with follow-up audits carried out at random which will touch 3 per cent of taxpayers each year, represent major and very extensive changes to the taxation system. I am aware that there has been very little public discussion on these individual matters, quite apart from the principles involved in the major change. So, we in the Liberal and National parties believe that we should be moving towards a further and wider examination of these questions. For that reason we will be moving at a later stage to refer this legislation to the Senate Standing Committee on Finance and Government Operations for examination and report. Senator SIDDONS(Victoria)(6.15) —The Senate is debating a group of Bills which seek to reform the taxation system. The group includes the Taxation Laws Amendment (Foreign Tax Credits) Bill 1986, the Taxation Laws Amendment Bill (No. 2) 1986, the Income Tax (Securities and Agreements) (Withholding Tax Recoupment) Bill 1986 and the Taxation Boards of Review (Transfer of Jurisdiction) Bill 1986. The Australian Democrats see a rational, equitable tax system as being necessary for the development of a strong and just society in this country. We will, therefore, be supporting the Bills now before the Senate. I do not propose to spend a great deal of time talking about these Bills in detail, particularly given the incredible amount of hot air and time wasting we have seen over the last few days in relation to the fringe benefits tax. However, I want to run over briefly what I see as being the major points in these Bills and comment briefly on some of the issues that will arise. I turn first to the Taxation Laws Amendment (Foreign Tax Credits) Bill 1986. This Bill will ensure that the income tax system is evened up within this country by taking out the bias that currently exists in favour of those who receive income from foreign sources where taxes are lower. This will have two effects: Firstly, it will discourage the use of tax havens and, secondly, it will encourage further investment in Australia. At present, a favourite form of corporate tax avoidance is to set up a subsidiary in a foreign tax haven and channel income from overseas sources through the tax haven. Profits can then be repatriated to Australia and the taxes will be deemed to have been paid on those profits and Australian tax will thus be avoided. This mechanism can result in very low tax bills and, thus, the burden of finding the revenue to run this country is put on the backs of the pay as you earn taxpayers. This is quite obviously very unjust. Foreign tax credits will equalise the tax payable on local and foreign income and, therefore, will make it unattractive for companies to move off-shore purely for tax reasons. I am not saying that companies should not move off-shore. Indeed, in many situations it is very desirable for foreign subsidiaries of Australian companies to be set up. This approach can often help Australian companies break into foreign markets, particularly in South East Asia, and this results in increased exports for the parent company in Australia. However, we should not encourage companies to move off-shore purely for tax reasons. By doing so, we are merely saying: `Okay, stop producing and creating jobs in Australia; go and do it some place else where you can get a tax break'. We are just worsening unemployment in this country, further running down the Australian economy and Australian industry and, of course, worsening our balance of payments problem. We cannot afford to encourage the further deindustrialisation of the Australian economy. Just look at the figures on capital outflow from this country over the last few years. In 1982-83 the capital outflow was $1250m; in 1983-84 it jumped to $2,262m; and, would honourable senators believe, by 1984-85 it rocketed to $4,932m. The fact is that foreign tax credits will help arrest this leakage of capital. Where this outflow is a result of a search for a low tax portfolio investment, the incentive will disappear. Where the outflow is a result of Australian companies moving off-shore purely for tax reasons, the movement will be slowed. No longer will companies be encouraged to close productive capacity in Australia and move to where taxes are lower. Now moves off-shore will be more likely to be fuelled by considerations of developing new markets. In other words, we still produce here in Australia, but it may be advantageous to set up plants in other Asian countries to assist export expansion plans. This type of activity is very desirable and it can add to productive capacity at home and abroad and increased export earnings for Australia. I now turn to the Taxation Laws Amendment Bill (No. 2). The Democrats believe that this Bill will introduce desirable reforms. A tax will be charged every year to holders of deferred interest securities, which will take into account the fact that these people have received interest in that year which has been deferred in favour of capital growth. Under the present laws, people holding deferred interest securities are not charged income tax. Even under the capital gains tax legislation, shortly to be put through this House, holders of such securities would still gain considerable tax advantage, as capital gains are indexed for inflation whereas yearly income tax is not. It is reasonable to charge tax on deferred interest on a yearly basis and we support that. This Bill also implements changes to the income tax secrecy provisions, which allow responsibility for the non-revenue aspect of superannuation fund regulation to be handed over from the Commissioner of Taxation to the treasury of a newly created superannuation body. The Democrats would like to see superannuation controlled by a body with a much wider brief than the Commissioner of Taxation. Superannuation funds and life insurance offices presently control over 50 per cent of the shares in Australian stock markets; a very large percentage. Once superannuation is extended to the 60 per cent of the work force which does not currently enjoy it, the control of superannuation funds over stock markets will increase dramatically. It is vital to the future of this country that these huge funds be regulated and channelled in such a way that Australia gains maximum benefit. I would like to see a new body set up to regulate superannuation funds which has to consider, as part of its brief, the effects on the wider economy of the investment of superannuation funds. The present financial system, with its tax encouragement of unproductive takeovers and share market speculation, is misdirecting enormous potential for the good and development of Australia for which superannuation funds could be used. At the moment companies are encouraged to engage in takeovers rather than to invest in productive areas. This sends the stock markets into a frenzy, resulting in more and more money being sucked into the unproductive whirlpool. Superannuation funds are now competing fiercely with each other for contributors' money. Their investment performance is compared in charts produced on a monthly basis and those which perform badly lose business to high flyers making returns of up to 60 per cent per annum. Returns of this nature are in cloud-cuckoo land. One gets returns of that nature only by speculating and taking great risks. Consequently, superannuation funds are now being used to buy and sell shares to make quick profits, to move funds overseas, to play foreign exchange markets and to ride on the backs of the takeover entrepreneurs. If this bubble should burst the superannuation benefits of millions of Australians will be looking very shaky indeed. The Democrats would like to see a new regulatory body which is prepared to address these sorts of problems. Superannuation can provide a way of funding Australians in retirement; a very desirable thing to happen. Superannuation funds can also act as a motor for genuine industrial development. Who can say that we do not need this right now, with the magnitude of the balance of payments crisis? However, if we wish to gain real benefits from superannuation we must ensure that the funds are used to fund real investment which will expand the productive capacity of this country and create jobs. We cannot afford to waste superannuation money by chasing speculative gains through buying and selling slices of an ever decreasing pie. The Democrats want to see an end to the takeover rorts. We want to see superannuation funds regulated to ensure that monies are invested only in Australian companies. We want to see a percentage of the funds turnover put aside to fund industry with export potential, the development of Australian technology, the majority Australian ownership in important resources projects, and also for housing. These funds could provide money at concessional rates of interest. Of course, some people say that this will not work, that the returns to the contributors, if this were to happen, would be too low. The fact of the matter is that we must look at superannuation in the long term, not on a monthly or quarterly basis as is being done currently. If we use wisely our superannuation funds, which represent the savings of Australians to develop industry we can all live better in retirement. In conclusion, I say that if we do not believe that this approach can work, let us look at Japan. It has prospered because it has used the financial system to fund growth in the real economy. We in Australia currently are strangling the real economy to give enormous speculative returns to those who manipulate the financial system. That is a recipe for disaster. Senator WALSH(Western Australia-Minister for Finance)(6.27) —in reply-The substantive points that have been raised in the debate will come out in the Committee stage, so I do not intend to delay the passage of the Bills any further. I understand that the motion cannot be put collectively because the Opposition will oppose one or more of the Bills. The ACTING DEPUTY PRESIDENT(Senator Bjelke-Petersen) —Is it the wish of the Senate to put the motion separately for each of the four Bills? There being no objection, I will allow that course to be followed. Question put: That the Taxation Laws Amendment (Foreign Tax Credits) Bill 1986 be read a second time. The Senate divided. (The President-Senator the Hon. Douglas McClelland) Ayes . . . . . . . . . . . 35 Noes . . . . . . . . . . . 28 —— Majority . . . . . . . . . 7 —— Aulich, T. McClelland, DouglasBlack, J. R. McIntosh, G. D. Bolkus, N. McKiernan, J. P. Button, J. N. Macklin, M. J. Childs, B. K. Maguire, G. R. Chipp, D. L. Ray, RobertCoates, J. Reynolds, M. Colston, M. A. Richardson, G. F. Cook, P. F. S. Robertson, E. A. (Teller)Cooney, B. Ryan, S. M. Crowley, R. A. Sanders, N. K. Devlin, R. Sibraa, K. W. Evans, Gareth Siddons, J. R. Foreman, D. J. Tate, M. C. Georges, G. Vigor, D. B. Giles, P. J. Walsh, P. A. Haines, J. Zakharov, A. O. Jones, G. N. Alston, R. K. R. Knowles, S. C. Archer, B. R. Lewis, A. W. R. Baume, Peter MacGibbon, D. J. Bjelke-Petersen, F. I. Messner, A. J. Boswell, R. L. D. Newman, J. M. Brownhill, D. G. C. Parer, W. R. Carrick, Sir John Puplick, C. J. G. Chaney, F. M. Reid, M. E. (Teller)Collard, S. J. Sheil, G. Crichton-Browne, N. A. Teague, B. C. Durack, P. D. Townley, M. Guilfoyle, Dame Margaret Walters, M. S. Hamer, D. J. Watson, J. O. W. Hill, R. Withers, R. G. Coleman, R. N. Kilgariff, B. F. Grimes, D. J. Short, J. R. Elstob, R. C. Vanstone, A. E. Morris, J. J. Baume, Michael Question so resolved in the affirmative. Bill read a second time. Sitting suspended from 6.34 to 8 p.m. The PRESIDENT —The question is: That the Taxation Laws Amendment Bill (No. 2) 1986 be now read a second time. The Senate divided. (The President-Senator the Hon. Douglas McClelland) Ayes . . . . . . . . . . . 30 Noes . . . . . . . . . . . 25 —— Majority . . . . . . . . . 5 —— Aulich, T. Haines, J. Black, J. R. Jones, G. N. Bolkus, N. McClelland, DouglasButton, J. N. McIntosh, G. D. (Teller)Childs, B. K. McKiernan, J. P. 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. Devlin, R. Sibraa, K. W. Elstob, R. C. Siddons, J. R. Evans, Gareth Tate, M. C. Georges, G. Vigor, D. B. Giles, P. J. Zakharov, A. O. Alston, R. K. R. Lewis, A. W. R. Baume, Michael 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. (Teller)Chaney, F. M. Teague, B. C. Collard, S. J. Townley, M. Crichton-Browne, N. A. Walters, M. S. Guilfoyle, Dame Margaret Watson, J. O. W. Hill,R. Withers, R. G. Knowles, S. C. Coleman, R. N. Grimes, D. J. Gietzelt, A. T. Robertson, E. A. Walsh, P. A. Crowley, R. A. Hamer, D. J. Kilgariff, B. F. Jessop, D. S. Vanstone, A. E. Durack, P. D. Sheil, G. Question so resolved in the affirmative. Bill read a second time. The PRESIDENT —The question is: That the Income Tax (Securities and Agreements) (Withholding Tax Recoupment) Bill 1986 be now read a second time. Question resolved in the affirmative. Bill read a second time. The PRESIDENT —The question is: That the Taxation Boards of Review (Transfer of Jurisdiction) Bill 1986 be now read a second time. Senator MESSNER(South Australia)(8.08) —I move: Leave out all words after `That' and insert `the Taxation Boards of Review (Transfer of Jurisdiction) Bill 1986 be referred to the Standing Committee on Finance and Government Operations for inquiry and report by the first day of sitting in August 1986'. During the second reading debate on this Bill I explained the reasons why the Opposition believes that it is important at this stage to refer this matter to the Standing Committee on Finance and Government Operations for report and examination. There are numerous matters flowing from this particular legislation, quite apart from the fact that it seems to be part of a package aimed at totally changing the taxation assessment system. The Government has announced that it will proceed with a self-assessment system together with an audit of 3 per cent of taxpayers. There will also be alterations to the system whereby taxpayers' assessments will be amended which, together with the new system of addressing appeals through the Administration Appeals Tribunal, seems to represent a considerable change to the rights of taxpayers and to the operation of the system as it applies today. We believe that that overall change has not been made the subject of enough public discussion; nor have all the issues been substantially exposed to the community for discussion. Consequently, it is our view that it ought to be referred to the Senate Committee on Finance and Government Operations in order to examine all the consequences of that decision. That is not to say that we oppose some of the individual measures that are incorporated in this legislation, and I pointed that out earlier. The fact is that numerous things can be done to improve and streamline the flow of cases regarding taxation matters through the appeals mechanism. Certainly, the present system is totally unsatisfactory because there is a backlog of some 94,000 cases-I think that is the number-that have not yet been processed through the system of appeals and through the boards of review. Clearly, that is an injustice, if you like, upon the taxpayer insofar as those appeals have not been heard, and the Government's steps in trying to improve that situation are welcomed by the Opposition. We believe, for instance, that the move towards single member tribunals hearing appeals in these cases is a reasonable and welcome change. However, we believe that there ought to be an appropriate airing of all the issues to make sure that taxpayers do have a thorough understanding of the way in which their rights may be curtailed or affected by those issues. For that reason, we have moved this amendment at this stage to ensure appropriate exposure of all the issues to the public gaze. The total change, which is very substantial, which is going on within the administration of taxation law should be made clear to the people of Australia so that they can put their views forward and, indeed, take issue with the Government on certain matters, if they so wish. Senator SIDDONS(Victoria)(8.12) —As I indicated in a previous speech, the Australian Democrats will not support the amendment which proposes that this legislation be sent to the Senate Standing Committee on Finance and Government Operations for the very good reason that the whole tax reform package was the subject of the National Taxation Summit in June of last year. Since that time, it has been subject to intense community debate and speculation. There is nothing worse than indecision; it creates nervousness in investment in this country and nervousness in the taxpayers. The worst possible thing that could happen to the Australian economy now would be for it to go through a further period of indecision on this whole tax reform package. This package, by whatever measure one likes to take, is the most significant reform of taxation in this country since 1945. As such, it has naturally created all kinds of problems, concerns and worries. But the community has had the opportunity to debate it. The Government put out a White Paper which canvassed the options absolutely-in great depth and very thoroughly. The Democrats believe that while the detail of some of the Bills that the Government has introduced is by no means perfect, it has grasped the nettle. It has introduced a package of tax reform. The Democrats were a part of the Taxation Summit. We listened very carefully to the community debate at that time and read carefully the Government's White Paper on tax reform, and we came to the conclusion that the general thrust of what the Government was doing was right. Senator Messner —It has nothing to do with this Bill. Senator SIDDONS —I say to Senator Messner that I am simply saying that to create another six or nine months of indecision on vital parts of that tax package would be the worst possible option. Senator Messner —It has nothing to do with the tax package. Senator SIDDONS —I am sorry, but it has. It is a part of the whole subject of tax reform. To put it to a committee at this stage and to create further indecision would be the worst possible option available to us. Question put: That the words proposed to be left out (Senator Messner's amendment) be left out. The Senate divided. (The President-Senator the Hon. Douglas McClelland) Ayes . . . . . . . . . . . 26 Noes . . . . . . . . . . . 32 —— Majority . . . . . . . . . 6 —— Alston, R. K. R. Lewis, A. W. R. Baume, Michael 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. (Teller)Chaney, F. M. Sheil, G. Collard, S. J. Teague, B. C. Crichton-Browne, N. A. Townley, M. Guilfoyle, Dame Margaret Walters, M. S. Hill, R. Watson, J. O. W. Knowles, S. C. Withers, R. G. Aulich, T. McClelland, DouglasBlack, J. R. McIntosh, G. D. (Teller)Bolkus, N. McKiernan, J. P. Button, J. N. Macklin, M. J. Childs, B. K. Maguire, G. R. Chipp, D. L. Mason, C. V. J. Coates, J. Morris, J. Colston, M. A. Ray, RobertCooney, B. Reynolds, M. Devlin, R. Richardson, G. F. Elstob, R. C. Ryan, S. M. Evans, Gareth Sibraa, K. W. Foreman, D. J. Siddons, J. R. Giles, P. J. Tate, M. C. Haines, J. Vigor, D. B. Jones, G. N. Zakharov, A. O. Short, J. R. Kilgariff, B. F. Vanstone, A. E. Jessop, D. S. Archer, B. R. Hamer, D. J. Coleman, R. N. Durack, P. D. Cook, P. F. S. Grimes, D. J. Crowley, R. A. Gietzelt, A. T. Walsh, P. A. Robertson, E. A. Question resolved in the negative. Original question resolved in the affirmative. Bill read a second time. Motion (by Senator Button) agreed to: That the Bills be considered in the following order- (1) Taxation Boards of Review (Transfer of Jurisdiction) Bill 1986; (2) Taxation Laws Amendment Bill (No. 2) 1986; (3) Income Tax (Securities and Agreements) (Withholding Tax Recoupment) Bill 1986; and (4) Taxation Laws Amendment (Foreign Tax Credits) Bill 1986. TAXATION BOARDS OF REVIEW (TRANSFER OF JURISDICTION) BILL 1986 Senator BUTTON(Victoria-Minister for Industry, Technology and Commerce)(8.24) —by leave-I move: Page 47, clause 138, proposed section 39A, definition of ``refund decision'', line 38, after ``a decision'', insert ``made on or after 1 July 1986''. Page 48, clause 139, at end of proposed sub-section 40 (3), add ``or within such further time as the Commissioner allows''. Page 70, clause 188, proposed sub-section 10 (5), definition of ``refund decision'', line 13, after ``decision'', insert ``made on or after 1 July 1986''. Page 86, clause 217 (2), lines 17 to 21, leave out the sub-clause. Page 86, sub-clause 217 (3), line 22, after ``1930'', insert ``as in force on 1 July 1986''. Clause 138 proposes the repeal of section 39A of the Sales Tax Assessment Act (No. 1) and the insertion of a new section 39A which will define certain terms for the purposes of Part VII of the Act. The term `refund decision' is defined in new section 39A and is intended to refer to decisions made on or after 1 July 1986 in relation to applications for a refund of tax. The amendment of clause 138 will ensure that the term `refund decision' means only a decision made on or after 1 July 1986. Clause 139 of the Bill will repeal sections 40, 41 and 42 of the Sales Tax Assessment Act (No. 1) and insert several new sections to deal with objections, reviews and appeals. Proposed sub-section 40 (3) will limit the kind of refund decision against which a person may object to a decision that is made in relation to an application lodged within 60 days of the transaction that gives rise to the refund entitlement. However, situations may arise where a person does not become aware of an entitlement to a refund within the 60-day time limit, and the amendment of clause 139 will allow the Commissioner of Taxation, in appropriate circumstances, to accept as valid an objection against a decision on an application for refund made outside the 60-day time limit. Clause 188 proposes to substitute a new section 10 in the Sales Tax Procedure Act. Sub-section 10 (5) contains definitions to assist in the interpretation of section 10. The amendment of clause 188 will amend the definition of `refund decision' in the same manner as the proposed amendment of clause 138 referred to earlier. Clause 217 of the Bill is a transitional provision dealing with sales tax matters. The amendment of the definition of `refund decision' in clauses 138 and 188 means that proposed sub-clause 217 (2) will become unnecessary. The amendment of sub-clause 217 (3) will correct a minor technical error in the Bill by making it clear that the section referred to in the sub-clause is the section in force on and after 1 July 1986. I commend the amendments to the Committee. Senator MESSNER(South Australia)(8.26) —Just listening to the Minister for Industry, Technology and Commerce (Senator Button) speak and putting down the reasons for the Government's amendments makes one think that there are no problems with them. But I think it is absolutely beneath contempt that the amendments were not introduced earlier. In fact, a copy of these amendments was put on my desk when I was on my feet discussing an earlier part of this taxation package. I had no knowledge of these amendments coming and no possibility of being able to study their effect. We have had no apology from the Government for such action. I believe that the kind of peremptory action which has been undertaken tonight is typical of the way in which the Government has been treating this chamber in regard to this legislation. We have a package of a considerable number of pieces of legislation of great complexity which will have a great deal of effect on the business community generally and we are expected to put them through this chamber sausage fashion. The way in which the Government has treated us without giving us any notice of this set of amendments at all is absolutely beyond understanding. In dealing with the Committee stage of the Bill let me say that we have sought to refer this whole Bill to the Senate Standing Committee on Finance and Government Operations. We believe that to be an appropriate course. We believe that this issue has not been exposed to the public in the way that it should have been. We believe that many concerns of the taxpayers are at issue and many people may have their rights curtailed as a result of the passage of this legislation. These matters have been referred to in debate in the House of Representatives at an earlier time. We believe that there are likely to be serious consequences and that taxpayers may well find that they have reason to complain to the Government about the passage of this legislation in such a hasty fashion. I must say that Senator Siddons, on behalf of the Australian Democrats, led us to believe that this legislation is somehow part and parcel of the Government's taxation passage. Of course it is not and it has never been part of the package. We heard nothing of this until only most recent days-about 10 days ago-when this legislation was introduced in the House of Representatives. I can recall, as early as the first week in May, asking questions of the Minister for Finance (Senator Walsh) about this matter and being told in this place that no decision had been taken about what might happen in this regard. Yet we have had a piece of legislation parcelled up in the dying days of this session, coupled with other measures with which it had no original relationship, and put before us as an issue which we have to decide upon, followed by a set of amendments which we have had absolutely no opportunity to digest. Amendments agreed to. Senator MESSNER(South Australia)(8.31) —During the second reading debate I referred to two matters which were of concern to the Opposition in regard to the Taxation Boards of Review (Transfer of Jurisdiction) Bill. One was in connection with the situation that would have arisen with regard to the requests from taxpayers for reasons which would have flowed had the original boards of review system applied. The point is that the Commissioner of Taxation has been obliged in the past to prepare and deliver the reasons for his judgment in taxation disputes to the taxpayer in the event of his appeal being turned down. That seems a quite reasonable proposition. However, with the system that will now apply because the boards of review will be incorporated into the Administrative Appeals Tribunal, what will occur is that reasons will not be given, except to the Administrative Appeals Tribunal, by the Commissioner of Taxation. I seek leave to move my amendments together. Leave granted. Senator MESSNER —I move: (1) Page 29, after clause 79, insert the following clause: `79a. Section 186 of the Principal Act is amended by adding at the end `and with a statement of reasons for that decision'.'. (2) Page 75, clause 196, proposed new section 14ze, modified section 30, (a) leave out paragraph (1) (c); and (b) at the end of modified section 30, add the following sub-section: `(4) Notwithstanding section 30a, the Attorney-General may not intervene in a proceeding to which this section applies.'. The second amendment affects the ability of the Attorney-General to intervene in matters before the AAT where the public interest is called into question. This seems to us to be an interference in and a curtailment of the rights of the individual taxpayer insofar as that would not have applied when the old boards of review were in existence. This is an extension of the power of the Commissioner and a curtailment of the power and rights of the individual taxpayer. It is for that reason I have moved the amendment to clause 196. Senator BUTTON(Victoria-Minister for Industry, Technology and Commerce)(8.34) —Both amendments are not acceptable to the Government. I will deal firstly with the first amendment. That amendment would require the Commissioner when giving his decision on any objection to give reasons for that decision. By reason of section 25d of the Acts Interpretation Act, the amendment would mean that the Commissioner of Taxation would, with every objection decision, be required to give a statement in writing setting out his findings on material questions of fact referring to the evidence or other material on which those findings were based and giving reasons for that decision. I make the point that, in income tax alone, some 250,000 objections are lodged each year. If the Commissioner were required to comply with section 25d of the Acts Interpretation Act in each case the work load would be tremendous. An army of tax officers would be required to comply with the requirement. At one day per statement it is not unreasonable to assume that approximately 1,000 extra staff would be required. This aspect was clearly recognised by the Administrative Review Council in its report on the boards of review when it recommended against such a proposal as has now been moved by the Opposition. The Commissioner will give reasons to the Administrative Appeals Tribunal and when the Administrative Appeals Tribunal gives a decision on these matters it will, in turn, give written reasons for its decision. The Opposition's amendment will just add an additional process, as it were, which would be costly in terms of time, staff and a whole range of issues. It was for that reason the Administrative Review Council recommended against it. The second amendment would have the effect of preventing the Attorney-General from making submissions to the Administrative Appeals Tribunal in respect of matters on which he has a special interest. The Attorney-General is responsible for the Administrative Appeals Tribunal Act and it is appropriate that he should be able to intervene, for example, to clarify important issues of interpretation of that Act. The Attorney-General's right of intervention extends to all Administrative Appeals Tribunal jurisdictions and there is no reason why an exception should be made in relation to taxation appeals. There would be a situation which was totally different from the general right of the Attorney-General to intervene. The important point in indicating the Government's reason for opposition to the second amendment moved by Senator Messner is that the Attorney-General exercises that right of intervention very rarely in respect of any jurisdiction. The Attorney-General would not intervene, as has been said in the second reading speech, in order to interpret a taxation law or to oppose a taxpayer's claim on its merits. It is a general right of intervention relating to interpretation of the legislation which is sought by the legislation and which would be rejected if the amendment was carried. For those reasons, the Government cannot accept either of these amendments. Senator MESSNER(South Australia)(8.37) —I want to get it straight. The Minister for Industry, Technology and Commerce clearly was saying to us that the Attorney-General would not intervene in circumstances involving the particular facts of a case before the Administrative Appeals Tribunal. In other words, it would be only on broad matters of principle that he would be seeking to intervene and to be heard on particular points. Am I right in understanding that the taxpayer's rights as such would not be affected by the intervention of the Attorney-General in those cases? Senator BUTTON(Victoria-Minister for Industry, Technology and Commerce)(8.38) —Yes. The Attorney-General would not intervene in respect of the facts of any particular taxpayer's case before the Administrative Appeals Tribunal. What is asserted by the Government is the right of the Attorney-General to intervene in relation to interpretation of the legislation and not in respect of the facts of any particular case. Senator MESSNER(South Australia)(8.39) —The point then is that the right of appeal remains with the taxpayer to the Federal Court of Australia, as I understand it, through the changed arrangements although, because of this Bill, the taxpayer will have forgone his right to take up matters of fact through the present Supreme Court system of appeals. Senator BUTTON(Victoria-Minister for Industry, Technology and Commerce)(8.40) —I understand the position is that the taxpayer can still go direct to a Supreme Court, if he so wishes. Senator Messner —Only on the facts, not the law, or both? Senator BUTTON —Both. If he goes to the Administrative Appeals Tribunal he can then go to the Federal Court. Senator Messner —On law? Senator BUTTON —On law. Senator Messner —Not on fact? Senator BUTTON —Yes. Amendments negatived. Bill, as amended, agreed to. TAXATION LAWS AMENDMENT BILL (NO. 2) 1986 Clauses 1 to 3-by leave-taken together, and agreed to. Clause 4 (Officers to observe secrecy). Senator MESSNER(South Australia)(8.41) —During the second reading debate on the Taxation Laws Amendment Bill (No. 2) 1986 we in the Opposition exposed our reason for opposing this particular clause. Simply stated, the reason is that this clause seems to seek to expand the powers of the Commissioner of Taxation to breach his duty of secrecy in respect of taxpayers' affairs and to hand over information to the Secretary to the Treasury in respect of some regulatory machinery, yet to be established, in regard to superannuation funds. We all know that superannuation is a very important and hot issue about the community at the moment. Certainly, the Government has been very slow in coming forward with details as to what it intends in regard to regulatory machinery and so on. This Bill seems to anticipate any action that the Government might take by providing that the Taxation Commissioner can provide secret information to the Secretary to the Treasury in advance of the Parliament, the people, the members of future superannuation funds, the trade unions or the employers knowing what indeed the machinery might be. That seems to be putting the cart before the horse as far as we are concerned. The Liberal and National parties will oppose this clause. Question put: That the clause stand as printed. The Committee divided. (The Temporary Chairman-Senator P. J. Giles) Ayes . . . . . . . . . . . 31 Noes . . . . . . . . . . . 26 —— Majority . . . . . . . . . 5 —— Aulich, T. McKiernan, J. P. Black, J. R. Maguire, G. R. Bolkus, N. Mason, C. V. J. Button, J. N. Morris, J. Childs, B. K. Ray, RobertChipp, D. L. Reynolds, M. Coates, J. Richardson, G. F. Colston, M. A. Robertson, E. A. Cooney, B. Ryan, S. M. Devlin, R. Sibraa, K. W. Elstob, R. C. Siddons, J. R. Evans, Gareth Tate, M. C. Foreman, D. J. Vigor, D. B. Giles, P. J. Walsh, P. A. Haines, J. Zakharov, A. O. Jones, G. N. (Teller) Alston, R. K. A. Lewis, A. W. R. Baume, Michael 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. (Teller)Chaney, F. M. Sheil, G. Collard, S. J. Teague, B. C. Crichton-Browne, N. A. Townley, M. Guilfoyle, Dame Margaret Walters, M. S. Hill, R. Watson, J. O. W. Knowles, S. C. Withers, R. G. Coleman, R. N. Kilgariff, B. F. Grimes, D. J. Short, J. R. Cook, P. F. S. Jessop, D. S. Gietzelt, A. T. Vanstone, A. E. Crowley, R. A. Hamer, D. J. McIntosh, G. D. Archer, B. R. McClelland, Douglas Durack, P. D. Question so resolved in the affirmative. Remainder of the Bill-by leave-taken as a whole. Senator BUTTON(Victoria-Minister for Industry, Technology and Commerce)(8.49) —by leave-I move: Page 4, clause 11, proposed new sub-section 128A (1a), line 15, leave out ``For'', insert ``subject to sub-section (1B), for''. Page 4, clause 11, after proposed new sub-section 128A (1a), add the following new sub-section: `` `(1B) Sub-section (1A) applies as if paragraph (c) of the definition of ``qualifying security'' in sub-section 159GP (1) were omitted.'.''. Page 27, clause 21, proposed new sub-section 221YMA (6), line 33, leave out ``For'', insert ``Subject to sub-section (7), for''. Page 27, clause 21, at end of proposed new section 221YMA, add the following new sub-section: `` `(7) Sub-section (6) applies as if paragraph (c) of the definition of ``qualifying security'' in sub-section 159GP (1) were omitted.'.''. Page 29, clause 25, proposed new sub-section 221YSA (4), line 5, leave out ``For'', insert ``Subject to sub-section (5), for''. Page 29, clause 25, at end of proposed new sub-section 221YSA (4), add the following new paragraphs: ``(c) expressions used in this section that are also used in Division 16E of Part III have the same respective meanings as in that Division; and (d) sections 159GV (other than sub-section 159GV (2)) and 159gz apply as if references in those sections to ``this Division'' were references to ``section 221YSA''.''. Page 29, clause 25, at end of proposed new section 221YSA, add the following new sub-section: `` `(5) Sub-section (4) applies as if paragraph (c) of the definition of ``qualifying security'' in sub-section 159GP (1) were omitted.'.''. Page 30, clause 26, proposed new sub-section 223 (9E), line 36, leave out ``For'', insert ``Subject to sub-section (9F), for''. Page 30, clause 26, after proposed new sub-section 223 (9E), add the following new sub-section: `` `(9F) Sub-section (9E) applies as if pararaph (c) of the definition of ``qualifying security'' in sub-section 159GP (1) were omitted.'.''. Page 31, clause 27, lines 1 to 13, leave out the clause. Page 31, clause 28, proposed new sub-section 265B (1), line 17, leave out ``For'', insert ``Subject to sub-section (1A), for''. Page 31, clause 28, after proposed new sub-section 265B (1), insert the following new sub-section: `` `(1A) Sub-section (1) applies as if paragraph (c) of the definition of ``qualifying security'' in sub-section 159GP(1) were omitted.'.''. Page 34, clause 32, after proposed new sub-section 8J(16), line 18, leave out ``For'', insert ``subject to sub-section (17), for''. Page 34, clause 32, after proposed new sub-section 8J(16), add the following new sub-section: `` `(17) Sub-section (16) applies as if paragraph (c) of the definition of ``qualifying security'' in sub-section 159GP (1) of the Income Tax Assessment Act 1936 were omitted.'.''. I apologise to Senator Messner in respect of the delay in regard to the circulation of the amendments to the earlier Bill. However, I understand that the amendments to the Taxation Laws Amendment Bill (No. 2) have been in circulation for some time. Amendments numbered 1 to 5, 7 to 9 and 11 to 14 will correct a drafting error in the definition of a qualifying security as that term is to apply to the measures contained in the Bill to strengthen the interest withholding tax provisions of the income tax law. The definition of a qualifying security is contained in those provisions of the Bill that will implement an accrual method of assessment to eliminate the tax deferral that discounted and other deferred interest securities offer resident taxpayers. As a drafting technique, that definition and others that are also relevant are imported into the interest withholding tax provisions of the Bill. Because deferral of tax is not an issue with securities having a term of less than one year, one of the tests contained in the definition of a qualifying security for the purposes of the accruals method of assessment is that the security is issued for a term in excess of one year. On the other hand, one of the interest withholding tax avoidance techniques being addressed by the Bill-broadly, the sale of a qualifying security before its redemption-can occur regardless of the term of the security. Due to an oversight, the definition of a qualifying security, as it is to apply in the interest withholding tax provisions, was not expressed to do so omitting reference to the term of the security. The unintended effect of this is to exclude from the scope of the interest withholding tax measures relevant securities issued for a term of one year or less. These amendments will rectify that. Amendment No. 6 will remedy a technical omission in clause 25 of the Bill by incorporating relevant definitions from an associated measure inadvertently omitted from that clause. The final amendment-No. 10-will omit clause 27 of the Bill. Clause 27 effectively provides that a person who relies in good faith on a false notice issued for the purposes of either of the measures applying to a qualifying security will not be liable for penalty additional tax which, by reason of other provisions of the Bill, is to be imposed in relation to the making of false or misleading statements. On further examination it has been concluded that those other provisions are so drafted that, in conjunction with the proper interpretation of the existing law in this area, the person concerned would not, in the circumstances I have described, be regarded as having made a false statement attracting penalty additional tax. Accordingly there is no need to specifically provide for remission of such tax as proposed by clause 27, and it is to be omitted from the Bill. I commend the amendments to the Committee. Amendments agreed to. Bill, as amended, agreed to. INCOME TAX (SECURITIES AND AGREEMENTS) (WITHHOLDING TAX RECOUPMENT) BILL 1986 Bill agreed to without amendment. TAXATION LAWS AMENDMENT (FOREIGN TAX CREDITS) BILL 1986 Bill agreed to without amendment. Taxation Boards of Review (Transfer of Jurisdiction) Bill 1986 and the Taxation Laws Amendment Bill (No. 2) 1986 reported with amendments and the Income Tax (Securities and Agreements) (Withholding Tax Recoupment) Bill 1986 and the Taxation Laws Amendment (Foreign Tax Credits) Bill 1986 reported without amendment or requests; report adopted. Motion (by Senator Button) proposed: That the Bills be now read a third time. Senator MESSNER(South Australia)(8.57) —We oppose at the third reading the Taxation Laws Amendment (Foreign Tax Credits) Bill 1986, but we do not propose to divide the Senate. Senator MICHAEL BAUME(New South Wales)(8.57) —I simply make one final plea to the Australian Democrats to recognise that what they are doing by supporting the Government is putting Australian companies at a major disadvantage when they are operating subsidiaries in countries overseas where the tax rate is lower than 49 per cent. That includes so many countries such as Malaysia, Singapore, the United Kingdom and the United States of America. This is really a disastrous piece of legislation for Australian companies at a time when we are desperately seeking to increase our external earnings in order to help our balance of payments crisis which has been brought on by this Government's policies. Question resolved in the affirmative. Bills read a third time. Consideration resumed from 30 May, on motion by Senator Grimes: That the Bills be now read a first time. Question resolved in the affirmative. Bills read a first time. Senator BUTTON(Victoria-Minister for Industry, Technology and Commerce)(8.58) —I move: That the Bills be now read a second time. I seek leave to have the second reading speeches incorporated in Hansard. Leave granted. The speeches read as follows- INCOME TAX ASSESSMENT AMENDMENT (CAPITAL GAINS) BILL 1986 The Bill before the Senate amends the Income Tax Assessment Act to introduce a tax on certain gains and modify the current income tax measures relating to the taxation of employee share benefits. Capital Gains Tax The legislation will enact a fundamental reform to the Australian taxation system. It will make the tax system much fairer by smashing the basis of much of the rampant tax avoidance that occurred under our predecessors. And it will make the tax system much more efficient by encouraging investment that will generate growth and jobs. For years a debate on this issue has dragged on in this country-a debate which unfortunately has too often been characterised by misinformation and hysteria rather than rational discussion. This Government invited discussion on a Capital Gains Tax at the National Taxation Summit in July 1985. We listened carefully to the views of the Australian people as expressed at that meeting, and the design of the tax reflects those views. Capital gains contribute to taxable capacity no less than wages and salaries, interest and dividends, and business trading profits. It has been particularly inequitable that those who receive their income primarily or wholly in forms such as wages and salaries have been taxed more heavily than those who have been able to arrange for much or all of their income to be taken in the form of capital gains. The absence of a Capital Gains Tax has also undermined the intended progressivity of the tax system since the distribution of the ownership of capital is more heavily concentrated among the higher income groups. In addition, it has been at the core of many tax avoidance arrangements involving the conversion or dressing up of income as capital gains. The introduction of a capital gains tax therefore strikes at one of the foundations of tax avoidance in Australia, and makes a crucial contribution to the Government's efforts to stamp out tax avoidance practices. The lack of a capital gains tax has also distorted investment choices towards less productive uses. Decisions to invest have been determined, not only by the overall yield of a project, but also by the composition of that yield as between tax free capital gains and assessable income. This has produced an inappropriate pattern of investment, preventing Australia from achieving the best possible economic growth rate. Australia is a capital scarce nation-the last thing it should be doing is providing incorrect signals to the market as to how to allocate that capital. By ameliorating this distortion, the capital gains tax will help to improve the overall productiveness with which capital is invested in Australia, improving our international competitiveness and lifting our economic growth rate. The design of the capital gains tax introduced by this Bill follows that announced in the Treasurer's 19 September 1985 statement on tax reform, as expanded upon in press releases which he issued on 28 November 1985 and 20 March 1986. I now turn to the main features of the Bill. Plan of the tax The tax will apply only to capital gains realised on assets acquired after 19 September 1985. Accordingly, assets acquired by taxpayers on or prior to that date will be exempt from the tax when disposed of by them. This will substantially reduce the immediate impact of the tax and allow the community a lengthy period in which to adjust to its application. Except where assets are acquired and disposed of within 12 months, the tax will apply only to real capital gains realised on the disposal of assets-that is to any gain remaining after removing the purely inflationary element. To achieve this, the cost base of assets will be regularly indexed according to the movement in the consumer price index over the time from when the expenditure was incurred to the date of disposal. This means that an asset which increases in value at no more than the rate of inflation will bear no capital gains tax. Assets whose value increases at more than the rate of inflation will be taxed only on that part of the gain which exceeds the inflation rate. Any real capital gain realised on an asset will be included in assessable income in the year of receipt and subject to income tax, but will receive the benefit of averaging. Under the system of averaging adopted, a capital gain realised in any year will be notionally spread over 5 years for purposes of determining the rate of income tax applicable to the whole of the gain in that year. Currently gains on assets are taxed if they fall within either section 25a or section 26aaa of the Income Tax Assessment Act. The former section will cease to apply for assets acquired after 19 September 1985 but section 26aaa, which deals with gains on assets bought and sold within twelve months, will continue to apply, where relevant. Consistent with the equity and anti-avoidance objectives of the tax, gains on the foreign assets of Australian residents, as well as gains on their Australian assets, are to be included in the capital gains tax base. However, relief from double taxation will be provided for any foreign tax levied on gains on foreign assets subject to the tax. One design feature of the capital gains tax requiring elaboration is its application to non-residents. Consistent with the principal that non-residents are subject to income tax on their Australian source income, the Government has decided that non-residents are to be taxed on a substantial range of capital gains. Broadly, the following assets owned by non-residents are to be included within the capital gains tax base: any asset used in carrying on a trade or business in Australia; land and buildings, and specified interests in land, situated in Australia; shares in Australian resident public companies or units in resident unit trusts, where the non-resident or his or her associates had at least a 10 per cent interest in the company or unit trust; and shares in Australian resident private companies and interests in resident partnerships and trusts. Because of the 10 per cent threshold test applying in relation to shares held in Australian public companies, it can be expected that the tax generally will not apply to purely portfolio holdings of Australian shares by non-residents. Where arrangements apply for the crediting of Australian capital gains tax against the non-resident's liability in his country of residence, the total tax burden will increase only to the extent, if any, that the rate of Australian tax exceeds that in the foreign country. This point is important to bear in mind when assessing the implications of the tax for the attractiveness of new foreign investment in Australia. Where crediting arrangements apply, failure to tax non-residents on their Australian source capital gains generally simply results in us giving up revenue for the benefit of foreign treasuries. An important general design feature of the tax is that the death of an asset holder will not be taken to give rise to a realisation of his or her assets for capital gains tax purposes. An exception applies where the beneficiary receiving the assets is exempt from income and capital gains tax to ensure that any gain accruing over the period that the deceased held the assets does not disappear entirely from the tax base. With certain exceptions-broadly, personal use assets and assets subject to income tax depreciation and balancing adjustments-nominal capital losses on the disposal of assets will be able to be offset against capital gains of the current or subsequent years. In calculating a gain or loss, any capital expenditures associated with the acquisition, improvement or disposal of an asset will be taken into account. Exemptions and Rollovers Honourable senators will recall some exclusions from the tax that have been announced previously. The most important exemption relates to gains on the taxpayer's principal residence. Also exempt is 20 per cent of the otherwise taxable capital gains on the sale of business goodwill wholly created by a taxpayer, where the net value of the taxpayer's business interests is less than one million dollars. Other exemptions include gains made by bodies exempt from income tax, the proceeds of life insurance and superannuation policies, gains on certain motor vehicles, and gains on most kinds of personal use assets whose disposal value is less than $5,000. Rollovers-that is, deferral of capital gains tax liability-are to be allowed for asset ownership changes associated with specified types of business reorganisations where no change occurs in the underlying ownership of the asset concerned or where the underlying assets against which the taxpayer has a claim do not change. The specific situations provided for include, for example, transfers of assets between companies in the same group, provided the companies share 100 per cent common ownership. The Government has considered the view that more general rollover relief should be available for business reorganisations on the argument that not to do so could inhibit desirable business behaviour. It has rejected this argument on equity grounds. Taken to its logical conclusion it is virtually akin to saying that it is only the capital gains of individuals not operating businesses which should be subject to the tax. Rollovers are also provided for certain involuntary asset disposals. These include the compulsory acquisition of assets by a government body and the theft or destruction of assets, where replacement assets are acquired within a stipulated period. In addition, in order to avoid the possibility of undue financial hardship, rollovers will apply for asset transfers between spouses incident to the breakdown of legal marriages. The Bill also generally provides for the continuation of capital gains tax exempt status where an asset acquired prior to 20 September 1985 is transferred in circumstances where it would have qualified for a rollover if acquired after that date. Additional Matters The Bill will give effect to the Government's decision to treat as new assets subject to capital gains tax major capital improvements made after 19 September 1985 to assets acquired on or before that date. A major capital improvement will be taken to have occurred where the indexed cost base of the improvements at the year of disposal exceeds both an indexed specified value-$50,000 for the year ending 30 June 1986-and 5 per cent of the asset's disposal value. To leave such major improvements outside of the capital gains tax base would significantly distort investment decisions as between the improvement of existing assets and the purchase of new assets. The Bill also provides for the capital gains tax treatment of trusts to parallel their income tax treatment. This will mean, for example, that where a beneficiary in a private trust or a unitholder in a public unit trust is presently entitled to a capital gain made by the trust, it will be taxed in the beneficiary's or unitholder's hands. Where this is not the case, it will be taxed in the trustee's hands. Capital gains tax will also apply to units held in unit trusts, where the units were acquired after 19 September 1985. Leases and leasehold improvements are to be treated as assets subject to capital gains tax. Special provisions are to apply where a leasehold interest in land is converted to freehold after 19 September 1985. Where the lease was acquired after that date, capital gains tax is not to apply until the freehold is disposed of. Where the lease was acquired on or before that date, and had a term of at least 99 years, the tax will not apply to the disposal of either the leasehold or freehold interest. Where the term was less than 99 years, the tax will only apply to any real gain accruing on the land from the time of its conversion to freehold. Also subject to capital gains tax will be payments for the surrender of various rights. An example would be payments under restrictive covenants whereby the recipient undertakes not to use specified assets or to trade only with the other party to the agreement. Such rights are assets and gains made on their disposal are to be included within the capital gains tax base where they are not already subject to income tax. The basic design features of the capital gains tax will apply to mining exploration and production rights. Their application is further explained in a press release issued on 22 May 1986. The Bill contains a number of specific anti-avoidance provisions. The general anti-avoidance provision of the Income Tax Assessment Act, Part IVa, will also, of course, have application. The tax will be assessed annually as part of the normal Income Tax Assessment process and the existing income tax penalty provisions will apply for breaches of the law in the Capital Gains Tax area. Finally, I would emphasise that, in designing the Capital Gains Tax, the Government has taken great care to ensure that it will not impact unfairly. The restriction of the tax to assets acquired after 19 September 1985, the exemption for the principal residence, the concessional treatment of personal use assets including motor vehicles, and the non-taxation of inflationary gains, mean that, for most taxpayers, the tax will have little or no impact. Groups such as farmers and small businessmen who have expressed concern that a Capital Gains Tax would be unduly harsh and lead to the break up or sale of the family farm or business upon their death have no foundation for such concern. The exemption for pre-20 September 1985 assets means that there will be no tax liability for farmers and small businessmen in respect of their asset holdings as at 19 September 1985. Further, the exemption for the principal residence and reasonable curtilage, the tax-free transfer of assets upon death and full indexation of gains for inflation, will mean that the vast majority of those who acquire farms or small businesses after that date are unlikely to face a substantial liability when they dispose of their assets. The availability of averaging provides further protection to taxpayers. Employee Share Acquisition Schemes As a consequence of the introduction of the Capital Gains Tax, amendments are also to be made to those provisions of the Income Tax Law that relate to the taxing of benefits associated with shares and share rights acquired under employee share acquisition schemes. Under the existing law, shares acquired under such schemes and subject to conditions or restrictions on disposal are taken to have been acquired when those conditions or restrictions cease to apply. The excess of the value of the shares at that time over their cost to the employee is subject to income tax. The result is that any unrealised nominal capital gain accrued between the date of issue and the date when the conditions or restrictions cease is subject to tax, as well as the ``Fringe Benefit'' element represented by the excess of the market value of the shares at their date of issue over their cost to the employee. In relation to share rights, the present law subjects to tax-when the rights are either disposed of or are exercised to acquire shares-the excess of the sale price or the value of the shares, as the case may be, over their cost of acquisition to the employee. Here also, an unrealised capital gain may be subject to income tax, in addition to any ``Fringe Benefit'' element. In respect of shares or rights issued after 19 September 1985, the Bill will give taxpayers the option of being taxed on the benefit derived as calculated at the date of issue, rather than at the relevant later date. Where that option is exercised by the taxpayer, the acquisition cost of the shares or rights for Capital Gains Tax purposes will be taken to be their market value at the date of issue. Financial Impact The estimated net revenue gain from the introduction of the capital gains tax and modifications to the employee share benefit provisions is $5 million in 1987-88 and $25 million in the fifth year of operation of the capital gains tax. This Bill marks another important step towards a fairer tax system. In revenue terms its direct yield is modest but it will make a significant contribution to protection of the income tax base. A detailed explanatory memorandum is being made available to honourable senators. I commend the Bill to the Senate. INCOME TAX (RATES) AMENDMENT (CAPITAL GAINS) BILL 1986 The purpose of this Bill is to amend the Income Tax (Rates) Act 1982, which declares the rates of tax payable by individuals and trustees generally, to implement the announcement of 28 November 1985 that a form of averaging would apply for calculating the tax payable on capital gains. The accompanying Bill proposes to amend the Income Tax Assessment Act to provide, generally that capital gains realised by a taxpayer, as a result of a disposal of assets acquired on or after 20 September 1985 will be included in the taxpayer's assessable income. The amendments made by this Bill will, broadly, require the tax payable in respect of a net capital gain realised in a year of income (after taking into account allowable capital losses) to be calculated by adding one-fifth of the net capital gain to the pre-gain taxable income. The additional tax attributable to that amount is to be multiplied by five to arrive at the tax payable on the capital gain. This will mean for those taxpayers whose taxable income other than capital gains is not taxed at the highest marginal rate, that the inclusion of a net capital gain will not necessarily result in income tax being levied at a higher marginal rate. This rule will be modified for primary producers and other taxpayers in receipt of forms of income receipts to which notional assessment procedures already apply to cushion the impact of crossing tax brackets. In those cases, one-fifth of the net capital gain will be added to the average income or the notional income, instead of adjusting the taxable income. The average or notional income in those cases will also be calculated without reference to the capital gain. I commend the Bill to the Senate. Senator MESSNER(South Australia)(8.59) —We can all remember these words: Let me make one point so that even our opponents can understand it, and let me make it beyond all their powers of misrepresentation and distortion-there will be no capital gains tax. These are the words that the Prime Minister (Mr Hawke) used, as the Leader of the Opposition, at the launching of the Australian Labor Party's policy at the Sydney Opera House on 16 February 1983. He said: `There will be no capital gains tax'. Of course, we have it in this legislation. Let us look over the history of this tawdry set of events. We recall the disastrous Taxation Summit that was called last year at which the Prime Minister laid down the so-called nine commandments of taxation reform. Amongst them was the edict that changes to the taxation system must help to smash tax avoidance. Yet any tax expert will tell us that of all taxes that we now have in this country-and God only knows we have far too many-the capital gains tax is the easiest to avoid. Capital gains tax, especially the capital gains tax which is the subject of this legislation, can be easily avoided by not selling one's assets. The long term effect of that is likely to be a stiffening-up in the market-place-financial arthritis, if you like-with people hanging onto their assets in order to avoid paying a capital gains tax. One of the arguments of the Treasurer (Mr Keating) for a capital gains tax is that it has an anti-avoidance effect when taxpayers clearly have been using capital gains as some kind of income. Clearly, that is a load of nonsense. In 1983 the Treasurer said that, in terms of revenue gain, capital taxes were `peripheral' and `marginal' and that they were not likely to produce revenue which the Government could use for the benefits of the people. If that is the case, how can it be a substantial tax which will improve the lot of other taxpayers? We recall those words well. They were uttered, I understand, at the Australian Labor Party's conference in 1983. Now the Treasurer would have us believe that this is some marvellous opportunity to improve the distribution of welfare in this community. This is utter nonsense. Later in November of 1984, the Treasurer said that there was no certainty that any capital gains tax would have any beneficial effects. Let us just find out what it is the Senate is debating here tonight. The fact is that the only reason we have a capital gains tax is that the Australian Council of Trade Unions is demanding that such a tax should be part of the accord. The ACTU told the Government to impose this tax. The Government was given this direction in a smoke-filled room back in July 1985 when the Prime Minister did his grubby little deal with the union leaders. Although this legislation will come into effect on 1 July, it will apply from 19 September of last year. The tax will be payable on all gains from 19 September at the taxpayer's highest marginal rate of tax. At present that rate stands at 61 per cent. The tax distinctly discriminates against low income earners whose marginal tax rates might be as low as 29 per cent. These people will have to pay an extra 32 per cent. The Government fails to recognise that it is the low income earners who worked the hardest to save and accumulate their capital assets. The tax will be far-reaching and has been described in the media as the toughest capital gains tax in the industrial world. Let us look at a few examples of how the tax will affect particular groups. Let us look at the death duty effect. In the case of bequests, the estate of the deceased will have to pay capital gains tax on gifts to churches and charities, which will, of course, draw on the other assets of the estate in order to net down to the required amount of money to be delivered to these bodies. Clearly, that is going to diminish in future the opportunities of people who will be looking to help the disadvantaged in the community. Capital improvements which may have been entered into prior to 19 September last year, when the Government announced this measure, will be subject to the capital gains tax. That obviously will affect the modification and extension of premises of taxpayers who want to improve their rental properties. It will obviously affect farmers who want to do the same. The question remains of how improvements will be valued when the gain is assessed after many years have passed. There has been no clear indication yet from the Government about that. Obviously this is going to be a major disincentive to investment in the future. It is obviously going to be in the interests of businesses to make do with patching-up and repairing bits and pieces of their equipment, plant and buildings. What is happening in the mining industry is another example of this financial arthritis that clearly is not going to assist development in this country towards the dynamic economy that we need in order to drag ourselves out of the industrial recession into which we are rapidly descending. Where either a lease or a right to take income from minerals is granted in consideration of a capital payment, the tax will be payable without any offsetting costs and irrespective of how long that land or mineral lease has been held. Let us look at the situation in normal business circumstances where there is a rollover of an asset towards the same kind of replacement asset that is needed in a business. In other words, when an asset is sold the capital is immediately reinvested in another asset. One example of this might be where a business person sells his premises to buy a larger office or factory which may be even more expensive. The capital gains tax will apply to the sale of the first premises and, as a result, add to the cost of the purchase of the second. Clearly, this is going to have a detrimental effect on the opportunities and the incentive of people to establish and develop new businesses, to become more efficient and to employ more people. The rollover relief will occur only in circumstances where there is 100 per cent ownership of the entities between the change. However, in other circumstances, the difficulties that I have described will arise. Perhaps one of the most callous issues in this capital gains tax is the question of goodwill. We all know of the case of a small business person who maybe starts off with a small corner delicatessen and who works 60 or 80 hours a week over 20 years to build up that business. However, when he comes to sell that business, his goodwill, apart from a mingy 20 per cent discount that this Government will now allow-and remember that this person has built up his business over a 20-year working life-will be taxable at the top marginal rate. Twenty years of work will go down the drain in one tax year and this will obviously affect his capacity to reinvest and develop or even to retire. I realise that an averaging provision will apply as well. However, we might as well forget about that for all the benefit it will be to people in these circumstances. The law provides for discounting for inflation. In other words, account can be taken of the cost and value increases of assets over a long period due to inflation. However, naturally enough, that will not apply in the case of goodwill because there is no cost base from which one can work. Consequently, inflation will not have any effect and the taxpayer will pay tax on the inflation component of the value of that goodwill. Should a person sell his business and at the same time enter into a restrictive covenant with the purchaser of the business, the same thing will apply to the purchaser of that business. The restrictive covenant that is entered into will have no cost base and, as a result, will not be indexed and, consequently, will in itself when resold become taxable. All of these things will hit small taxpayers; people at the lowest end of the income scale. They are not the wealthy stock exchange speculators or the wealthy landowners who live on Sydney harbour; they are the ordinary people of Australia, the battlers, who are trying to do their best to build up assets in their own name so that they do not become a burden on society. This, of course, is typical of the Australian Labor Party's attitude. It is clear that all it wants to do is to smash the small business community because it knows that the small business community is likely to give it the most trouble politically in actively opposing the union movement. We can go through the numerous examples of problems that will arise with the various aspects of this capital gains tax before us. There will be problems for people who are living in some kind of residence provided by a private company. Shareholders who owned shares before 19 September 1985 will hang on to those shares and so distort the stock market as a result, because they know that when they sell they will have to pay tax and as such there is no incentive to sell, thus causing prices to rise artificially higher than they ought. People who have built a holiday house on a block of land for which they have saved through their lifetime, who have put their own labour into the erection of that holiday house and who have spent their own money on buying the bits and pieces associated with it, will find that the labour costs that they have put into that holiday house will not be taken into account for capital gains tax purposes. The only costs that will be identified are those classed as directly associated with the materials on which they have expended money. Consequently, they will be paying tax on their own labour in that situation. The question of the way in which this capital gains tax will apply to takeovers may be very interesting to people such as the Australian Democrats who have views about the current state of the takeover market, but I ask them to consider the situation of legitimate takeovers which are in the genuine interests of Australia by virtue of the fact that there will be a consolidation of assets and an improvement in the economies of scale which will ensure that the consumer wins out of that takeover. All of these things are incorporated in this piece of legislation. We in the Liberal and National parties oppose the legislation. We will be opposing it at all stages and will be seeking to repeal that legislation when we are returned to government at the end of 1988. Senator Walsh —At the end of 1988? Senator MESSNER —I am sorry, 1987. I thank Senator Walsh for reminding me that it will be a year earlier than that. It is hard to understand what the Government has in mind in introducing a tax such as this. Even the former Whitlam Government found it impossible to administer and very difficult to implement and dropped the whole idea back in 1974 when it sought to introduce similar legislation. When we look at what the Treasurer has been saying-that it is marginal and will increase the funds to the Government only in a very small way-quite clearly he must have had some conversion on the road to Damascus or some other place because now he has become convinced that this is the saviour for all mankind. According to Government's own figures, some $5m will be raised out of this tax next year and this amount might rise to a maximum of $25m in the space of the next four or five years. I discovered from a question on notice that I put to the Minister for Finance (Senator Walsh) a few weeks ago that even in 1995, some ten years after the original announcement, it is expected that the Government will raise only $150m. Senator Crichton-Browne —But you are assuming that the legislation will not be amended, by removing the CPI factor and other indicators. Senator MESSNER —Senator Crichton-Browne has raised a very important point. This is really only the sprat to catch the mackerel. What this legislation is about is getting a foot in the door. The Government, having established this kind of tax, which perhaps can be sold in a plausible way as being quite easy to live with, can turn to other factors and remove the advantage of inflation, for instance, and in doing so may well increase the amount of revenue that can be generated from this source. Obviously it suits the intention of the Government to get the legislation in place so that it can change it at will at some later stage. Clearly it is that which is behind its thinking. The Bill is consistent, as we see it, with the Government's original statement. We objected to the Government's original statement. We believe that the introduction of a capital gains tax at this critical time of our national economy is absolutely stupid, crazy and in line with all of the other crazy issues that have been raised in this tax package in the past several months, which have been debated here in the past few days. The Government would have to be out of its mind to introduce at this time a tax upon incentives and investment, which clearly are so necessary to get the country out of the hole in which the Hawke Government has put it. For the past three years this Government has faced enormous challenges and it has failed at every jump. The Government has had the opportunity, with a recovering economy and the drought having broken in 1983, to be able to deal with the deficit that obviously was not being reduced significantly and which could have been reduced further by its actions, yet it has failed to do so. Had the Government addressed itself to those issues and had it not continued the heavy program of borrowing overseas, fuelled by a very high interest rate policy, perhaps we would have seen a changed economy in Australia. Now we are about to pay the piper for three years of borrowings which have doubled the national overseas debt to a figure approaching $80 billion. The repayments on that debt are growing every day and we find that we are running into debt at the rate of $1,000m a month. Yet this Government sees fit to introduce a tax in a capital-short country such as Australia; a tax which will stop the development of investment in this country. All the statistics that have been issued, particularly in the past few days, demonstrate that there is a crying need for investment in this economy, to create jobs, to get us out of the hole and to put us in a more competitive situation compared with countries of Asia such as Hong Kong and Singapore and countries of the growing nations such as India and China. Yet the Government sees fit to go in exactly the opposite direction. We have seen this with the foreign tax credits system, the fringe benefits tax and the capital gains tax. What is wrong with this Government? When will it wake up to what is wrong with this country? Instead of imposing further costs on business, it ought to be seeking and finding ways of lifting those costs so that it can encourage business to become more competitive on world markets. Instead, it is going in precisely the wrong direction. One of the things that the Government can do to help business confidence in this country right here and now is to say that it will not proceed with the tax package. The Bills which have been passed against our opposition in the past few days can still be held up, if this Government wakes up to itself, by stopping the signature of the Governor-General from being applied to those Bills. Even now it can still help Australia by doing that. We challenge it to do that as part of a meaningful plan to turn around the Australian psyche, the confidence of Australians, so that we can encourage investment and not seek to destroy it in the way in which this Government is seeking to destroy it by the introduction of this legislation. The capital gains tax is, I think, the fifth part of this Government's package. It has been a long time coming. It has been a disgrace that we have not known the details of this tax since September last year. We have been waiting while people have been incurring a tax liability during that time without knowing what it was that they were paying taxes on. It is only now that we see this legislation before us. The Opposition opposes it, and we will oppose it at every stage during the debate in the Senate. Senator MAGUIRE(South Australia)(9.21) —This evening we are debating the Income Tax Assessment Amendment (Capital Gains) Bill 1986 and the Income Tax (Rates) Amendment (Capital Gains) Bill 1986. This is historic legislation and an historic debate. The Opposition is so blind that it cannot see it in that way. It is, of course, hankering after the golden age of tax avoidance and tax evasion-an age when taxation was voluntary for the wealthy; when paying one's proper share of tax was seen as aberrant; when decent and ordinary taxpayers lost faith in the fairness of the tax system. Of course, a fair tax system cannot be constructed from the values of the past. A new direction is needed. As a result of this package of tax measures, Australia's tax system is poised to enter the twentieth century. The Government's tax reform package will restore fairness and equity to the Australian tax system. It restores the ability to pay principle, not the ability to avoid tax. Under the old system, pay as you earn taxpayers were forced to shoulder an ever increasing tax burden, while high income earners were able to exploit rorts in the system and avoid paying tax. The tax package contains corrective measures designed to eliminate those rorts and restore equity. One of the most important corrective measures is the capital gains tax. Australia has been out of line with the other developed countries of the world until this point. We have few major taxes on assets, unlike other countries. In fact, there is a very compelling case for a capital gains tax, because the wealthy obtain increased economic welfare from increases in asset values, while ordinary taxpayers typically have assets which do not rise in value, such as bank deposits, building society deposits and the like. Yet they pay full tax on the interest income of those deposits. There is a case for a capital gains tax because realised capital gains represent an increase in purchasing power, an increase in wealth. There is a case for a capital gains tax because capital gains represent an increase in taxable capacity. As I have indicated, under the old tax system in Australia capital gains were not taxed. This factor breaches the principle of horizontal equity-that is, those with similar economic circumstances should pay similar amounts of tax. Horizontal equity has been breached in Australia because wages and salaries have been taxed, but capital gains have not. Of course, the principle of vertical equity has been breached as well. Pay as you earn taxpayers have been taxed on every dollar they earn, while a minority in this country have received tax free gains. The ownership of capital in Australia is skewed to the wealthy. The fact that gains have been untaxed is blatantly unfair. The concession of no capital gains tax on the rich had to stop, because all taxpayers should pay their fair share of tax. The Government believes that it is only fair that those people whose economic welfare is derived from capital gains should pay their fair share of tax, like everybody else. Australia unfortunately has been unlike the other developed countries of the world. Until now there has been no comprehensive tax on capital gains in this country. In fact, until the introduction of this legislation, of all the developed industrialised countries of the world, only Australia and the Netherlands have had no capital gains tax. Many developed countries-those with which we normally compare ourselves-have not one, not two, but three taxes on assets. They have capital gains, plus estate duties, plus an annual net wealth tax. We had no tax on assets at the national level until this point. I would like to hark back to the Asprey report-the Taxation Review Committee-which was presented in the 1970s. The Asprey Committee was not appointed by a Labor government; it was appointed by a Liberal government. The Asprey report, when it came out, indicated that there were very strong arguments in Australia for a capital gains tax. In fact, it recommended a capital gains tax because it said it would make the Australian tax system fairer, and simpler and would help economic efficiency. That is a report which was published by a committee appointed by a Liberal government, not a Labor government. That report stated that Australia was somewhat out of the mainstream in thought and practice in this particular area. That was the report of a committee appointed by the Liberals. It said that we needed a simpler, fairer and more efficient tax system in Australia. It was totally ignored by the Party which appointed it. Until this time all we have had in the capital gains tax area has been taxation of gains where the purpose of buying assets was to make a profit-the so-called section 25a provision. We have also had section 26aaa, the so-called 12 months rule, which provided that assets bought and sold within the 12-month period were taxed at the full marginal income tax rates. That is what we have had in Australia. We have had absolutely no comprehensive tax on capital gains in this country. In contrast to the hysterical claims of the Opposition, the capital gains tax is both sensible and moderate. The fact is that the capital gains tax will not affect the vast majority of Australian taxpayers. The family home will be exempt, despite Opposition scare campaigns that the principal residence would be taxed. The principal residence, as you will be aware, Madam Acting Deputy President, is the major asset of most Australians. It will be completely exempt from this tax. Only real capital gains accrued from the date of introduction of the tax will be taxed. That is very generous treatment, compared with the treatment of wage and salary earners. The fact is that the capital gains tax will be levied only on the real increases in the value of assets. Meanwhile, wage and salary earners are taxed on their money incomes. So it is a very generous treatment of capital gains. In fact, most countries tax the nominal gains; they do not tax real gains. They do not adjust asset values for inflation; they tax the money value of the gains. I indicate also that the capital gains tax is entirely prospective; it is not a retrospective tax. It applies only to assets purchased after a base date. In fact, it applies only to assets purchased or acquired from 20 September 1985, the day after the tax package was announced. All assets owned by taxpayers before 20 September will be exempt from the tax, both in respect of gains accrued to that date and all future gains realised on those assets. As I have indicated, the tax will apply to real gains made on the sale of assets. That means that the owner of an asset which increases in value at no more than the general inflation rate in the community pays absolutely no tax, while owners of assets whose value increases at a greater rate than the general rate of inflation in the community will be taxed only on that part of the gain which is in excess of the inflation rate. I believe the indexing of capital gains is a very generous concession; in certain circumstances one could argue that it is overly generous. I instance the case where asset purchases are substantially financed by borrowed funds. It is very well known in financial circles that inflation reduces the real value of borrowings anyway. People are being taxed on the asset values before borrowing, and I believe that is extremely generous. The capital gains tax will be levied at the taxpayer's ordinary rate of personal income tax or at the company tax rate and under this Government that rate will be 49c in the dollar. The capital gains tax will be levied on a realisation basis, not on an accruals basis as has been recommended in some reports. That avoids liquidity problems and also the need to have assets valued. There will be far fewer valuation problems as a result of having the tax levied on a realisation basis. Allowance will be made for realised nominal losses to be offset against capital gains in the current year or they can be carried forward. Also, it is very important to note that negative gearing losses on rental properties will be allowed as offsets against realised capital gains; therefore, the negative gearing legislation which we have just passed is nowhere near as harsh as the Opposition would have us believe. The capital gains tax will give a complete exemption to the taxpayer's personal residence and, as I pointed out earlier this evening, that is the major asset of most Australians. That will be completely exempt from the tax. All motor vehicles will be completely exempt and other personal use items, such as furniture up to the sale value of $5,000 a year, will be exempt. Senator Parer —One lounge suite. Senator MAGUIRE —That might be so by Senator Parer's standards, but not by those of the vast majority of Australians. Capital gains with respect to superannuation and the proceeds of life insurance policies will be exempt from tax. Also expenditures incurred to improve the value of assets will be included in the cost base to be increased by the consumer price index before the real capital gain is calculated. It is very important to note that, despite the scare campaigns being waged in the community, the capital gains tax is not a death duty. The Government has decided that the deemed realisation at death proposal outlined in the draft White Paper of July last year will not apply, so it is not a death duty. Liability for tax in the case of death will be rolled over to successors and will be assessed only on any subsequent disposal. The tax will apply only when the rolled over asset is sold or transferred by gift. Hence, small businessmen and farmers should not be concerned that death will lead to the break up of farms and small businesses because it will not apply. The tax will be rolled over to successors. Our capital gains tax is also generous because only two other developed countries of the world which tax capital gains do not have deemed realisation at death. Most have deemed realisation at death. Those two that do not have it, have death duties. As I have indicated, this capital gains tax will be levied on a realisation basis so that people will have cash available with which to pay the tax, unlike the situation which could apply if it were levied on an accruals basis. As it is being levied on a realisation basis at disposal, funds should be available to pay. This capital gains tax will be relatively mild, and that is reflected in the revenue estimates. I note in this context that the existing section 25A of the Income Tax Assessment Act, which raises revenue, is being abolished, so we must look at revenue collections in the context of an existing section of the Act being abolished. The capital gains tax will raise some $5m next financial year, rising to $25m in later years. It should be pointed out that most of the extra revenue will come as extra income tax, not as extra capital gains tax, because the existence of a capital gains tax shores up the base for the personal income tax. It cements in the personal income tax system. It reduces the scope to convert income, which is taxable, to capital gains, which are non-taxable. I should indicate that possibly more revenue will be raised by the capital gains tax than has been budgeted for because the fact is that, since the Government announced its tax package, vast quantities of shares have been bought and sold on Australian stock exchanges. In fact, there has been a share market boom since the capital gains tax was announced by the Government. As a result of that boom, as a result of the buying and selling of vast numbers of shares, those shares have lost their tax exempt status. When they are resold, extra revenue will be collected by way of capital gains tax. Clearly, those investors, those share market operators, who have been buying record numbers of company shares in recent months were not worried by the existence of a capital gains tax. They were not deterred from making their decisions to buy and sell shares. There have been record turnovers on Australian stock exchanges since this proposal was announced. The operators in the market have not been deterred by it. They have not been deterred by the nonsense of the claims from the Liberal Party of Australia that somehow incentive, whatever that is, will be affected. That has not stopped record purchases. On one day last week some $148m of shares were traded on Australian stock exchanges, after the announcement of the capital gains tax. So clearly investors on the share market see that they can live with this tax. Their record purchases day after day, week after week and month after month expose the Opposition's fear campaign for what it is. Investors are not deterred from buying shares in record amounts. In fact, Opposition members have a pavlovian response to the concept of a capital gains tax. The mere mention of the words makes them froth at the mouth. The only exception is Senator Robert Hill, who in his 1981 maiden speech in this place supported the concept of a capital gains tax. Senator Robert Hill, the current President of the Liberal Party in South Australia, in his excellent 1981 maiden speech endorsed very strongly the notion that there should be a capital gains tax in Australia. Senator Giles —It was a principled speech. Senator MAGUIRE —Yes, it was a highly principled speech, and I enjoyed reading it. It was an excellent contribution. Like other Government senators, during this debate I will be interested to see how Senator Robert Hill will vote on this legislation. In 1981 he told the people of Australia that it was time that we looked at the introduction of a capital gains tax in Australia. The Opposition's rantings about a capital gains tax usually centre on the claim that business incentive, whatever that is, will somehow be affected. If we are to believe some of the Opposition's more outlandish claims, the wheels of industry should come grinding to a halt overnight. I just point out that Australia is now joining every other Western industrialised country, with the exception of the Netherlands, in implementing a comprehensive capital gains tax. Does the Opposition seriously suggest that business incentive has been stifled in Japan? Does it seriously suggest that business incentive has been stifled in the United States of America? Does it seriously suggest that business incentive has been stifled in West Germany? The United States of America, the home of small business and the country worshipped by the Opposition, has taxed capital gains for years. The home of free enterprise and business has taxed capital gains for years. Small business has prospered in that country. The Opposition has not even bothered to define what it means by incentive. It is not clear what specific incentive or investment it believes will be affected by the capital gains tax. I believe that the capital gains tax will deter unproductive investment. Speculative property investment will no longer be so attractive. It will also deter tax avoidance and tax evasion. It will reduce the practice of income, which is taxable, being converted into capital gains, which are untaxable, through the use of many artificial devices. It will reduce criminal tax evasion schemes. Are these the kinds of incentives that the Opposition wants to protect? I refer to the incentive to speculate in unproductive land deals, the incentive to avoid paying taxes and the incentive to defraud the Government of revenues. I believe that the capital gains tax will channel investment away from unproductive areas to productive areas of the Australian economy. At the National Taxation Summit last year, the Business Council of Australia, not noted for supporting the Labor Government, and the Victorian Chamber of Manufactures, not linked in any way to the Labor Government in Victoria, both supported the capital gains tax. They did not think industry would be hit by it. In fact, at the National Taxation Summit the capital gains tax was strongly and roundly endorsed by everybody as being essential for the reform of the Australian tax base. Many organisations supported the capital gains tax at the National Taxation Summit. I instance CSR Ltd, whose general manager Mr Kelman endorsed the capital gains tax. I instance the largest investment company in Australia, the Australian Mutual Provident Society, whose general manager, Mr Coates, endorsed the capital gains tax. The buoyancy of national share markets since the announcement of the tax reforms contradicts Opposition claims of an imminent collapse in business activity. The share market index has hit record highs day after day, week after week and month after month. Contrary to the misleading allegations of the Opposition the Government's tax package will not raise the level of taxation in this country. It proposes a redistribution of taxation, not an increase in the overall burden. The tax redistribution will be based on the capacity to pay principle rather than on the ability to cheat. This is what the Opposition parties are objecting to. The coalition parties are objecting to the elimination of unfair privileges that have allowed a wealthy minority to exploit the tax system. The capital gains tax and the fringe benefits tax will tax those sources of income which for too long have benefited the wealthy minority at the expense of ordinary taxpayers. The revenue raised from the capital gains tax will be redistributed to help finance tax cuts for ordinary Australians. I simply point out that a relatively small group of people will pay this tax. The great majority of Australians will receive tax cuts as a result of the Government's package. The top marginal rate of income tax will be reduced from 60c in the dollar to 49c. The most common rate at the moment-46c in the dollar-will be reduced to 40c and the bottom rate of 25c in the dollar will be reduced to 24c. Those tax cuts will be financed by measures such as the fringe benefits tax and the capital gains tax. The revenue from those taxes is vital to finance the income tax reductions for many Australians. The important thing to note is that under Labor the bottom marginal income tax rate will be 24c in the dollar. The best that Mr Howard, the current Leader of the Opposition and former Treasurer, could manage in five Budgets as Treasurer of this country was 30c in the dollar. Our bottom tax rate will be 24c in the dollar. Clearly, Labor is the low tax party in this country. The capital gains tax will not have any of the dire effects predicted by the Opposition. Its claims are based on dogmatic assertion rather than on rational economic analysis. They are based on self-interest rather than on the public good. They are based on fear rather than on responsibility. The Government's intention is to ensure that all taxpayers pay their share of tax. That is what the capital gains tax is designed to do. It will bring Australia into line with nearly every other developed country in the world. It will redistribute the tax burden. It will reinstate the principles of fairness and equity to the very centre of the tax system. It will make the economy more efficient. It will result in better allocation of resources. That will be good for the future growth of Australia. The capital gains tax is a common sense measure. It is a long overdue measure. It is a twentieth century measure. Senator SIDDONS(Victoria)(9.45) —The Australian Democrats believe that a capital gains tax is a necessity in any developed country, and it has been Democrats policy since the Party's foundation in 1977-a policy, I might add, that was directly voted in by all our members. Our members represent a cross-section of the Australian community. Australia is the odd country out in the developed world in that it has not had a capital gains tax. The European countries, including Great Britain, the United States and Japan all have such a tax. Both social democratic and conservative governments alike have seen capital gains taxes as a necessary part of the tax system. Why have we not had a capital gains tax in Australia? I believe the answer to that is simple. It is that powerful interest groups could not think, and are not now prepared to think, on a truly national basis. Tax avoidance cannot be clamped down on unless we have a capital gains tax. In the early 1980s all sorts of distortions began to appear in the tax system and progressively more and more of the tax burden in this country was being placed on the poor pay as you earn taxpayer. The tax system which had developed essentially meant that if a person was on wages, the Government could get its hands on his income but if he was on a non-wage income, he may not have had to pay any tax at all. That attitude was encouraged in no small measure by the High Court of Australia at that time. This attitude of the late 1970s and early 1980s had its logical conclusion in the bottom of the harbour rorts. They were so blatant and costing the Government so much revenue that the Treasurer at the time, Mr John Howard, was forced eventually to act against them. The only way we can have a fair tax system in this country is to have a capital gains tax. I believe this is basic, it is axiomatic and it is beyond dispute by any reasonable, fair-minded Australian. It is the only way that all classes of income can be treated in the same way. I congratulate the Government on implementing a capital gains tax at the relevant marginal rate of tax. Senator Knowles —What has happened to your promise to keep them honest? Senator SIDDONS —The honourable senator will get her turn later. It has long been Democrats policy that the capital gains tax should be levied at the marginal rate. It is something that the Democrats called for from the outset of the tax debate. To have a lower rate of capital gains tax is to encourage the conversion of income into capital. That is the very thing that a capital gains tax is designed to prevent. Interestingly, a part of the new tax package developed by the United States Senate is to change the capital gains tax in that country from one levied at a flat rate to one levied at the marginal rate. I believe that a capital gains tax will have many beneficial effects in this country. It will promote equity in the tax system by ensuring that all bear a fair share of the tax burden. It will end the opportunity to avoid tax through schemes designed to turn income into capital and it will encourage the very thing that I so often and almost tirelessly call for in this place-productive investment. At present, there is an incentive to put money into things such as land which returns tax-free capital gains. This simply pushes up the price of land and it encourages speculation. The investor and the speculator, of course, are very happy about this because what they want to see is the price of land rise at as fast a rate as possible. The only person to suffer under this scenario is the first home buyer. During the property boom in Sydney in the early 1980s prices were rising so quickly that an average couple could not save enough money for a deposit. Prices were rising faster than they could save. Senator Parer —The demand was greater than the supply. Senator SIDDONS —In a country the size of the United States of America, with 15 million people? Let us be sensible. The Australian Democrats are very proud of the input we have had into the planning of this capital gains tax, both in our initial discussions with the Government before the National Taxation Summit last year, during the Taxation Summit, and during our negotiations with the Treasurer (Mr Keating) in December last year. I believe that the Democrats' intervention has ensured that the capital gains tax is equitable and non-punitive. Senator Boswell —How did you do that? Senator SIDDONS —I am going to list no less than eight very important concessions that the Democrats gained to ensure that the capital gains tax, as we are now debating it and as it has been put in the legislation before us, will be non-punitive and equitable. The eight concessions that the Democrats take credit for are these: Firstly, we stipulated that the tax should not be retrospective. There was, in fact, no attempt to tax gains before the implementation of the tax. It is very doubtful whether that would have happened without the Democrats' initiative in that area. Secondly, we also said that the tax should be indexed to take into account inflation. In this way, only the real gains would fall into the tax net-not paper gains made purely as a result of movements in the consumer price index. Interestingly, most countries that have a flat rate capital gains tax, such as the United States of America, do not index that tax for inflation. This means that gains over a long period are taxed more harshly with a flat tax than will be the case in Australia with our capital gains tax at the marginal rates but indexed for inflation, which is a very important point. If there is an incentive to put money into long-term investments this is precisely what we want and precisely what we will have with an indexed capital gains tax at the marginal rate. Thirdly, we advocated that capital losses should be offset against capital gains and that any further input of capital after the purchase of an asset should be indexed and added to the cost of that asset. I am happy to say that this is part of the legislation. Fourthly, in the early stages of the debate on capital gains we spoke out very strongly, insisting that the family home should not be part of the capital gains tax. This is very desirable and it is fair since the home is not a traded asset in most cases; it is merely a place to live and, when we sell it, we have to buy another one. The fifth concession for which the Democrats take credit is that the Government initially was planning to deem realisation of a capital gain at death. As a result of our protests, the Government changed that approach. The sixth benefit that I believe the Democrats won from the Government, after the capital gains tax was announced, was to get the Government to consider the problem of goodwill for small businesses. In this legislation the Government has gone part of the way to meeting our requirements to take goodwill into account in the case of small businesses. The Government had said that it would give concessions on new businesses only. We felt that was not fair enough and was not in the spirit of our initial discussions on this matter. The Government has since agreed that all small businesses, and not just new businesses, will be subject to a reduction of the capital gains tax for goodwill. We will be moving an amendment in this area in the Committee stage. This concession is very important because small business people often work very long hours for very little money, preferring to put all their returns back into the business to enable it to expand. The goodwill component is the intangible human input into a business. By giving small businesses this concession we are encouraging hard work and recognising the often poor financial rewards of a proprietor as he or she builds up his business. The seventh concession we gained from the Government, and which we believe is very important, is that employee share ownership will not be discouraged as a result of the capital gains tax. Under the tax as it was originally proposed, if an employer were to sell his shares he would have had to pay tax on the difference between the discounted price of the share and the sales price. That is reasonable. But the Government went further. It said that a capital gains tax had to be paid on the shares even before the shares were sold, as they had appreciated during the time they were being purchased. This would have discouraged employee share purchasing. The Government has seen our point of view and has eliminated the realisation of capital gains on employee share purchases before they are sold. The eighth concession the Democrats negotiated with the Government concerns the averaging of capital gains over a period of five years. Farmers and other people often have incomes which vary substantially from year to year. This has been recognised by the Government, which has allowed people whose incomes fluctuate violently to have their incomes averaged over five years. This is a reasonable principle to apply in the case of a capital gains tax as capital gains are won over a period of years, not one year. To tax capital gains in one year at a very high marginal rate of tax in many cases would be very unfair. I believe that we now have a capital gains tax which is fair. It makes no distinction between income earned personally and income which results from capital appreciation. It treats all income in the same way. It is very significant that we are introducing this legislation now, when the United States is only just beginning to consider doing the same thing. The US is now proposing to treat all income in the same way. We have a capital gains tax which undoubtedly will enable the Government to crack down on tax rorts. For that reason alone one would have thought that the Opposition would have been prepared to concede that something had to be done in this area. It escapes my comprehension how there can be an outcry such as we have heard tonight about a capital gains tax when we are the only country in the Western world which for so long has not had one, when we have gone through the disgusting spectacle of the late 1970s with the bottom of the harbour tax rorts, and when we see people making enormous amounts of money overnight from speculations in their shares and other areas while the pay as you earn taxpayer pays, in many cases, a marginal tax rate of above 60 per cent on the results of his personal efforts. We support this capital gains tax. We think it is as good now as it could be. We look forward to seeing after 30 June many of the tax rorts that have prevailed in this country for so long being eliminated. Senator MacGIBBON(Queensland)(10.01) —Australia does not need a new capital gains tax. We already have very effective legislation on the books against speculative capital gains. I suppose as the first advanced country to go back to Third World status we are entitled to have all the accoutrements of a Third World country. Certainly this punitive capital gains tax, the heaviest capital gains tax in the whole world, fits in with the Third World status that the Labor Party has taken us back to. I do not want to spend very long dealing with the previous speakers who have supported the concept of a capital gains tax. The point that they do not understand when they talk about other countries is that the whole tax take in other countries is considerably less than it is in Australia. Senator Walsh —What countries? Senator MacGIBBON —I do not think that any of the speakers, including the Minister for Finance, who is speaking from profound ignorance at present, have ever lived outside Australia, let alone paid tax outside Australia. I have lived for a large part of my life outside Australia and I have paid tax in several different countries. I paid my full tax entitlement while I lived there. I have never lived in a country that taxed me more heavily than the Commonwealth of Australia. When we are talking about the United States of America, the academic armchair theorists on the other side do not understand that the actual personal income tax level and the other taxations that are placed on citizens in that country, particularly the man trying to raise a family, are very much less and are probably of the order of half what they are in Australia. That has to be taken into account when the Government is trying to milk the cow. Australia already has very effective legislation against capital gains. Section 25a and section 26aaa provide all the legislative power if the Government and the Australian Taxation Office have the courage and the competence to apply the law, but they do not. That is why we have some evasion. But section 25a covers the intention when a person purchases something to make a profit. If he purchases it with the intention of making a profit on resale, it does not matter how long he owns that asset, he is obliged to pay tax under the law. Section 26aaa is even more stringent. It does not matter what a person buys, if he sells it within 12 months he has to pay capital gains tax on it. This legislation has been in place in Australia for years. It covers the objectionable part of speculation that the Labor Party is carrying on about. All we need is the will to prosecute the law. The Treasurer (Mr Keating), in his second reading speech in the other place, makes a very great thing about people who take income in the form of capital gains and avoid paying income tax on it, but the legislation is there to prevent it. Apart from section 25a and section 26aaa, there are other more sophisticated and additional measures on the books and they are all that we need to cover the people who are beating their entitlement to pay tax. Why do we not need a new tax? The very basic point is that Australia is short of capital. What we ought to do in Australia is guide and encourage people to a degree of frugality so that they look after themselves. But what does a Labor government do? Frugality is a dirty word for it. It encourages prodigality: Spend everything. Spend all one can. Spend everything every week so that at the end of the day one is dependent on the government. That way one will support the Labor Party; one will be dependent on it for everything. Australians historically have a very low level of personal savings. Under this Government the personal family debt in Australia is the highest it has ever been in its history. It is about 50 per cent above the historical average levels. Why would we not be in debt at present when we are being hit with some of the heaviest taxes in the world-certainly some of the highest taxes of any of the advanced countries. We have lavish welfare programs. I do not mind-I support-welfare payments going to those in need, but we have fraud, incompetence in the administration and a Minister who is not prepared to police his Department, who gives money away without any sense of audit at all. Why should that be the case? To do that sort of thing we have to have heavy taxation. If Australians do not save, how do we develop the country? We have to borrow money from overseas to bring money in. That is not good for us because we have to pay it back and we have to pay interest on the money we borrow. Why can we not encourage Australians to build their own capital so that we can do the essential development in this country? Let us look at this business of putting a disincentive on savings. If people do not save, if people do not put money in the banks, the banks simply do not have money to lend. In Japan, where there is the highest level of savings in the world, the Japanese banks are flush with money. In Japan if one wants to borrow money to start a small business one can get interest rates of around 5 or 6 per cent. In Australia, where we do not have a high level of savings and money is reasonably scarce, plus we have the positive policy of this Government to run a crippling high interest rate, Australian businesses have to borrow at 18 per cent, at best, but probably at 22 per cent or upwards to get going. The very real effect of that in the commercial world is that a lot of businesses simply cannot start at a level of 18 to 20 per cent interest on borrowed money whereas they could employ people and they could prosper if they could get money at 6 per cent. But that is not the Labor ethos. Labor does not want people to look after themselves; everything that is an incentive to people's financial growth and independence has to be repressed and banned. Earlier this week we debated the fringe benefits tax Bills. A direct effect of that legislation will be to depress economic activity in Australia and to lower the standard of living. We are going to get exactly the same consequence with the capital gains legislation. It will primarily affect small business and it will also depress the standard of living of Australians. The Government tells us it is introducing this legislation to get tax money and to prevent avoidance. One of the indirect consequences of this legislation is that there will be positive incentives put in the paths of people to beat the tax wherever they can because the law is getting so much more complicated. The Income Tax Assessment Amendment (Capital Gains) Bill alone is 103 pages in its printing. Just imagine the feast the lawyers and the accountants are going to have trying to interpret this little section about capital gains tax. Just think of the loopholes in 103 pages, because quite certainly the Treasurer does not understand it and nor will the people in the Taxation Office. We will get an increase in tax evasion and in the black economy as a result of this legislation. Another very important reason against a capital gains tax is that it kills off the entrepreneurial spirit in Australia. It does it in two ways. First of all, the small businessman who wants to get going, build up a family business with his wife and his children and employ people-a major area of employment in Australia-is discouraged from doing so. The other side of it is in the high technology field. The free enterprise system has been responsible for the great increase in the standard of living in the last 100 years of the Western democracies. It is not the governments with their welfare payments that have lifted the standard of living; the standard of living has been lifted because of the free enterprise system. It has been the profits that have been made, the employment that has been generated and the taxes that have been generated through these economic systems that have given us the lift in the standard of living that we enjoy today. The free enterprise system is a two-way street. It gives people the right to make a profit and to retain that profit, but it also gives people the right to go broke. Under the one-eyed Australian Labor Party, the only right one has is the right to go broke. One does not have the right to make a profit, one does not have the incentive to make a profit and one certainly does not have a chance in the world of retaining the money that comes as a profit from the exercise engaged in. There is nothing wrong with working hard, taking risks and making a profit, except if one is a Labor voter. The ability to make money turns on two factors. First of all, there is one's personal ability and the economic environment in the society in which one is living and trading at the time. That is in part a measure of the individual qualities of the entrepreneurs and in part the legislation of the government of the day. The second part of the equation, the ability to retain profits, is purely a matter for the government of the day. The government of the day, by the tax legislation it puts in place, dictates the ability of someone to retain the profits from their entrepreneurial ability. Therefore, the Government has a very direct relationship to the incentives for people to strive and to grow economically, or not to grow. All industrial countries recognise that new industries-high technology industries using modern science and technology-have great economic benefits. Those great economic benefits are not restricted to the owner-entrepreneur. They flow through the whole society and benefit everyone. The rising tide lifts all the boats. Those countries in the Western world that are doing best-and there are no countries doing well on the other side of the Iron Curtain with their socialist economies-are those with the greatest entrepreneurial freedom. It does not matter whether someone makes $100,000 profit or $100m profit through a company provided that person is paying the company tax and other taxes placed upon him. It is quite proper for such people to retain the balance of their profits after they have paid their company tax. However, it is not proper to the Labor Party. The Labor Party much prefers its takeover friends who support it with campaign funds and who borrow hundreds of millions or billions of dollars overseas in order to take over Australian companies. These people create no new jobs. They create no new export markets at all. They strip us of the profitability of the companies they take over because the profitability goes in interest payments, thereby denuding the Treasury of those funds. That is the sort of thing that the Labor Party in government has supported. In the history of Australia we have never seen such a rape of Australian industry by asset strippers as has taken place under this Government. It has taken place because this is the sort of policy that the Labor Party wants. The final reason why we should not have a capital gains tax comes from the words of the Prime Minister (Mr Hawke) himself. He said: And here let me make one point so that even our opponents can understand it; and let me make it beyond all their powers of misrepresentation and distortion. There will be no new capital gains tax. The Prime Minister said that at the Sydney Opera House on 16 February 1983. Like every other promise from the bodgie king, it has been broken. Why did Labor change? Why did Labor break its promise? It did so because it is part of the Labor doctrine and part of the Labor ethos. The Labor Party wants to tax middle Australia out of existence. We are paying the highest taxes we have ever paid. We have the introduction of death duties in the guise of this capital gains tax. We have a fringe benefits tax. We have an exorbitant excise rate. We are paying a huge amount in excise now on petrol. What is worse, the damn thing is indexed. It is sneaking up surreptitiously every few months because the Treasurer excised the rate of excise duty. What is happening is that middle Australia is being reduced to mendicant status. We are seeing the independence of middle Australia reduced so that in the end we will all be dependent with our begging bowls on a Labor government for sustenance. The second reason Labor has done this is that it is part of its mythology that there is a huge pool of unpaid taxes out there in the community just waiting to be collected. That is not true. There is no vast pool of money out there due to the Treasury. It simply does not exist. When the Labor Party looks at people selling capital assets at a higher price than they paid for them, it fails to understand that that increased price largely comes as a consequence of inflation. It looks at inflation and at the artificially reduced figures, the indices of inflation that it puts up under its regime. As any housewife would know, under Labor the actual level of inflation is probably 5 per cent or 8 per cent higher than the Australian Statistician's figures. It is the effect of inflation more than anything else that has increased the value of assets in Australia. The sad part about this is that it was the Labor Party which gave us this inflation. It was the mad economic irresponsibility of all those years of Whitlam, the wild spending, which set the fires of inflation burning in Australia and which we have been unable to control for over 10 years. That situation has been eclipsed by the Hawke regime, because now we have the biggest deficits, the highest taxes and the highest borrowings ever to occur in Australia's history. What is in this Bill? We have a capital gains tax of which the Labor Party and the Australian Democrats are so proud. However, what they did not say was that it is the most savage capital gains tax in the world. It is at the highest level ever. Why do we need this tax, when other countries in the world are retreating from capital gains tax? Senator Siddons referred to the situation in the United States of America. I have news for him. The United States has never had a capital gains tax as high as Australia's proposed capital gains tax. The United States has progressively reduced the level of its capital gains tax and I believe that in the fullness of time it will have no capital gains tax. It has had the opportunity to experience its operation and to assess the negative effect of such a punitive tax on economic activity. But we are going to have it, and we will have the highest in the world. It is a tax that will be punitive on small business. Such businesses often involve the battler who perhaps undertakes to start a business with his wife. He works for many hours a week, perhaps 100 or 120 hours a week, trying to make a living. He does not have a 17 1/2 per cent annual loading on his holidays, because he does not have holidays. He does not have four weeks annual leave that the unionists such as Senator Maguire have. He does not have penalty rates when he works a Sunday or a Saturday night. He does not have a 38-hour week, or a nine-day fortnight so dear to the union movement. He does not have redundancy deals and a golden handshake if he cannot earn a living. He never gets maternity or paternity leave. He does not get the national wage increases, and he will not get the superannuation carve-up that the unions are going for. The little guy in small business works his fingers to the bone building up an asset that he can sell at the end of his working days so that he and his wife can retire and look after themselves, and not be a penalty on the Australian taxpayer. That poor little guy will be hit with a heavy capital gains tax at the end of 30 or 40 years hard labour. Is that justice? Is that the sort of society we want for Australia? It is certainly not one that I want. The Labor Party has excluded the family home from these provisions, but it has not excluded the farm. It has not excluded the properties in the country, the cattle properties and the sheep properties. The great earners of export income for Australia through this form of death duty will be subjected to crippling imposts. But the family home will be free. I am happy that the family home is free, but I would like all capital and assets to be free. By introducing this freedom for the home a great perversion has been introduced into the taxation scheme. People will build an extra wing or storey on their house, thus overcapitalising the asset, because that asset will be free of a capital gains tax. There will be a huge distortion in the market-place, but the Labor Party does not understand that. When the Government has a Treasurer whose economic background before he came into the Parliament was selling solid gold watches in Kings Cross at midnight, one can expect the sorts of policies that we have. We have policies which will hit not only the shopkeepers and the tradesmen but also the little people, such as the guy who keeps some stamps, who keeps some coins, who potters around with old cars. When he comes to sell those assets he will be hit with this savage tax. But more than that, he will have the incredible worry of trying to establish what he paid for it, what he has put into it, what the market value of it is now, and deal with all the mindless insensitivity of the bureaucracy-all for no purpose whatsoever. Senator Sheil —The fellow who does some paintings. Senator MacGIBBON —Yes. The nastiest of all, of course, is the attack on the charities. The spirit of humanity, the spirit of benevolence in the Australian community is now being taxed in the most appalling way possible. When I die and leave a house or an asset to a church in order to help them look after people in need, my estate will have to pay capital gains tax on that asset. There will be a total prohibition on people doing that sort of thing. But from a government which only this week gave us a capital gains tax on charities, and the savage and inhuman way it did this, at least this is consistent. This legislation is totally unnecessary because there is adequate legislation on the books at present. It is stupid legislation because it places no reward for effort in the Australian financial or commercial world. It is grossly unfair and inhuman in the way it operates against charities. The 103 pages are extraordinarily complicated. Once it is in place the Australian community can look forward with absolute certainty that as this Government spends itself deeper and deeper into debt the rates will go up savagely year by year. Senator COONEY(Victoria)(10.22) —We have heard from Senator MacGibbon in his usual robust style a speech in which he analyses how this tax will affect certain people in the community. He said-and this is correct-that the impact on people of any taxation is not nice. That is a statement with which many of us, including those people listening in, would agree. Nobody likes paying taxes. Nobody likes paying anything, I suppose, if they can hold on to the money. Senator Tate —I don't. Senator COONEY —As Senator Tate says, he doesn't. That tax is bad, that tax falls on particular people in certain instances and that tax is harsh is something we all acknowledge. The Opposition, with great respect, is saying: `We don't like taxes'. Of course, nobody likes taxes. But if we are to live in a community, if we are to have a defence force, if we are to run education and all those sorts of accoutrements of civilisation of which we are all so justly proud, somebody has to pay. The people who have been paying in the past have been the pay as you earn taxpayers; they are the people who have shouldered the burden. Let us consider the person who is out in the morning on the job and comes home to his wife and children; perhaps even the wife has to work. There they are, trying to make their way in life in the city or in the country. And what happens? They pay their taxes which are due. They say: `Why doesn't my neighbour pay tax?' We say: `He does not have to pay tax because he had, or she had, the ability to transfer that income into capital. We have made capital sacrosanct'. Those opposite say we can prey upon-rip off if one likes-and tax the wage earner, the person who goes out and by the sweat of his or her brow works up a job, a career, but throughout that career pays money from the earnings that he or she makes; but the person who has the means and ability to live by capital is exempt and has to pay absolutely nothing. It is not fair at all. Senator MacGibbon said that it was not fair. He pointed out, and quite correctly-and approved of, as I understand it-that a capital gains tax already exists under section 25a and section 26aaa of the Income Tax Assessment Act. Senator Crichton-Browne, a man of great fairness, whom I see sitting opposite, also agrees with that. So the fact is that everybody approves of the capital gains tax. Indeed, Senator MacGibbon says that we should go back and make section 25a and section 26aaa work. We say that that is exactly what we are doing by introducing this legislation. We are doing what the Opposition has demanded we do. Not only do we say that; we say that if we go along with the Opposition we are a little concerned that its approach to the capital gains tax may be too harsh. We say that our provisions will not have the effect that sections 25a and 26aaa would have. We say that would include the family home, and because our Government has regard for the family and has a great passion to see that the ordinary family man is justly treated, we say that we will not tax the family home. Sections 25a and 26aaa, as they now stand and as the Opposition want them to remain as the way of gathering taxes on capital advancement, are not the sort of thing we want. We will exempt the family home because we regard the family as sacrosanct. Senator Tate —What about a bachelor's home? Senator COONEY —I would say to Senator Tate that this Government even goes so far-and I think that perhaps we are wrong in this-as to exempt bachelors from having to pay tax on capital gains on their home. That is a matter of some concern. No doubt Senator Parer, Senator Brownhill and Senator Boswell will speak in approval of sections 25a and 26aaa. Senator MacGibbon has already done so. They will say they feel that there should be some sort of tax on increments from capital, but they will also say that the way in which this Government is tackling the matter is wrong. The general thrust, I believe, of what they are saying-and they can correct me if I am wrong-is correct. If it is not correct, are they saying that they will deny the ordinary working man and woman, the person who battles his or her way through life, the tax cuts that this Government has so desperately sought to put on the books? That is what this Government is all about. It wants to make those tax deductions and it has been prevented from doing so because of the efforts of the Opposition. I cannot discover what the basis of their opposition to this argument is. Opposition members have asked what the Government intends to do about the small business person. We are doing plenty, and indeed we are doing two positive things. We shall reduce the rate of his or her income tax and we will leave more money in the pockets of more people who can expend that and increase consumption. The other aspect will be to ensure that instead of money being put into land to lie there fallow waiting for land values to go up so that people can gain, without tax, money they have made no effort to earn, it will go into productive factories, farm lands, shops and industries throughout the country. Because of the redirection of money people will have more jobs, Australia will be more prosperous, and this country will get under way as should have happened many years ago. Because no proper consideration has been given to a capital gains tax, investment has been poor. Not only was there no capital gains tax during the 1970s, but because of bottom of the harbour schemes money was available in big lumps and in great proportions for people to invest in industry. But what did they do? They did not invest that money. They went on overseas trips, they bought luxury cars from overseas, and they did all sorts of things that did not help industries here. The people who enjoyed that great advantage in the 1970s did not invest in the ways in which this tax will induce them to invest. It is all very well to come along and talk about some person who may be affected by this. But what about the thousands and thousands of people on the other hand who are going to benefit from these tax cuts? Of course, as Senator Maguire so eloquently pointed out, it is not a matter of raising extra taxes; it is a matter of redistributing the taxes that already are gained. Debate interrupted. The PRESIDENT —Order! It being 10.30 p.m., under sessional order, I put the question: That the Senate do now adjourn. Senator ZAKHAROV(Victoria)(10.30) —I want to speak tonight about a film which has had a lot of publicity in the last few days. I think I am unusual in that I am one of the very few Australians who have actually viewed that film. The film is called Hail Mary in Australia. However, the original title of this French language film is Je Vous Salue, Marie, which is not quite the same thing in that it can also be translated as `I greet you Mary'. So, in fact to call the film Hail Mary is perhaps to give a false impression in the first place. As I said, I saw the film last year. I found that to be a pleasurable, exciting and moving experience. A year later, I am appalled to find that that film is being attacked by a number of people in Australia. As far as I can determine, very few, if any, of those people have actually seen the film. I find that horrifying in itself. Senator Sheil —Did you see it in French? Senator ZAKHAROV —I saw it in French, which I speak, with sub-titles. Senator Crichton-Browne —Do you mean you speak French with sub-titles? Senator ZAKHAROV —Yes, I can. The honourable senator should try me some time. Concern about this film has been raised during Question Time in both the Senate and the other place. Also, I understand that it was the subject of speeches during the adjournment debate last night in the other place. In every case the matter has been raised by people who have not viewed the film and who are acting in response to a rather hysterical campaign whipped up, again, by people who, as far as I know, on the whole, have not seen the film. The Australian Film Censorship Board unanimously decided to classify the film-in other words, to pass it for showing in Australia. I understand that the only disagreement among the nine members of the Board was whether it should be classified `M' or `R'. I think the lack of agreement in that case indicates that the film is certainly not pornographic, as some people have claimed. It is said that the film is blasphemous. I do not claim to be an expert in what people perceive as being blasphemous. However, I would have thought that other films which have been freely available in the past would be more likely to come into that category. One example would be the Life of Brian. This could also be said about many television shows such as the Dave Allen Show which has recently been on television in Melbourne and Monty Python which might be perceived as being far more blasphemous than this film. Senator Archer —What are your standards of blasphemy? Senator ZAKHAROV —As I said, I do not claim to be an expert in blasphemy. However, I certainly feel that I have more right to speak about this film than those who have not viewed it. I think that people who are likely to be offended by it would have been more offended by the Life of Brian, which I have also seen. One of the interesting things about the current furore over this film is that at least the majority of those protesting have not seen it. Yet, they are willing to pass very vocal judgment. I saw the film in a school hall in Locarno in Switzerland last year where it was a part of the world famous Locarno Film Festival. I stress that Switzerland is a country with a very predominantly Christian population. It probably has a higher average church attendance, both Protestant and Catholic, than is the case in this country. Indeed, a large monastery in the town virtually overshadows the place where the festival was held. I read the reviews in the French language papers from both France and Switzerland in the week following the initial showing of the film. There was certainly no criticism of the sort that we have heard here. There was no outcry from the people who, again, had the opportunity to see the film. I add, too, that being able to read the French newspapers was an advantage. I was with my son at the time, who speaks German, and he read the German language papers. Again, there was no outcry there, either, and why should there be? Senator Sheil —Did he see the film? Senator ZAKHAROV —Yes, he saw it with me. First, it was made by a renowned director. I do not know how many people here are film buffs, but those who are would have certainly heard of Jean-Luc Godard, himself a Christian and, according to some sources that I have not been able to check out completely, and I have not been able to ask him myself, a Catholic. I found it a thoughtful and sensitive film and I find it hard to imagine that any sensible person could read into it what it is alleged to show. Before I say anything more about it, I would like to read a few reviews that come from Catholic sources so that I cannot be accused of picking my reviews with bias. Senator Crichton-Browne —Is it Catholic? Senator ZAKHAROV —It is from Catholic sources. Senator Crichton-Browne —What about the Anglicans? Senator ZAKHAROV —The Anglicans do not seem to have been inflamed by this in the same way as the Catholics have. Hugh Kay of the British Catholic paper, the Month, writes: At a time when the virgin birth is under fire as never before . . . this film re-asserts it. It is a plea for the ideals of chastity, for recognition of the primacy of the spirit, and of the mysterious ways in which God deals with men and women. Mary is presented . . . as a very attractive girl . . . confused and uncertain, whose act of faith and submission is extremely costly to her. Dorothy Fothergill, writing in the same Catholic paper, the Month, says: Mary (Myriem Roussel) is shown as a young girl of great integrity, deep awareness of unseen reality, moral strength, imagination, serenity-a quite credible outfit for Mary of Nazareth. Like Joan of Arc, she hears her `voice' that supports her. She has a certain nobility even when, out of sympathy with Joseph's agony in mind, she acts with a degree of today's sexual freedom that may well be a shock to the sensibilities of the faithful, east and west, accustomed to revere the Mother of Christ as the Mother of God, and it was undoubtedly the reason for the film's `18' certificate. That is a certificate allowing the film to be shown only to those over 18. It is the equivalent of our `R' certificate. The International Catholic Organisation for Cinema and Audio-Visual issued this statement at the announcement of official awards at the Berlin International Film Festival on 26 February 1985: Aware of the difficulties due to the originality of its form and subject, the OCIC jury unanimously wishes to state its interest in Jean-Luc Godard's film Je Vous Salue, Marie, and in particular to mention its revolutionary approach to this theme. Godard delicately uses an ancient creed in his attempt to solve the inexplicable mystery of life and love, illustrating the connections between sensuality and purity, the physical and the metaphysical, the reconciliation of the mundane and the spiritual. The OCIC jury urges an unprejudiced approach to the film. Peter Stanford, writing in the Catholic Herald, states: Godard's modern Mary, as she has been inaccurately dubbed, is the basketball-playing daughter of a petrol station manager. In many ways she is surprisingly orthodox for one who has caused such a furore across the continent of Europe. The central concepts of the annunciation and the virgin birth are upheld and in fact adorned with a reverence that is all the more immediate for its contemporary setting. The fact that Mary serves petrol and Joseph drives a taxi are modern day equivalents of what ordinary people in Galilee might well have done 2000 years ago. After all, are today's school children not encouraged to fashion their productions of the nativity around modern settings? They are just a few of the reviews from those sorts of sources. Some critics have given the impression that the film has been widely banned overseas. This is, in fact, not so. Action has been taken, for example, in Versailles in France, which seems to be the place where all this furore came from originally, but it was action taken on grounds of blasphemy and it was rejected by the court. Similarly, in Pesaro in Italy the film was taken to court, which again rejected the application. Director Godard himself withdrew the film from exhibition in Rome in deference to the wishes of the Pope-he said he did that with some pain. I would like now to refer to some of the allegations that have been made about this film, specifically some remarks made in the other place last night. A comment was made that it `portrays the Virgin Mary as a foul mouthed woman'. I would say that it is only in the eyes of the viewer that this character Marie represents the Virgin Mary; it is not stated in the film. She is certainly not foul mouthed by the current standards of the Australian community. Senator Boswell —Whose standards? Senator ZAKHAROV —The standards of the Australian community-your standards. It has also been said-I have read this in a number of places-that Mary derives pleasure from the infant Jesus fondling her. Again, viewers may have identified the child as Jesus Christ, but it is not stated that the child is and I regard that allegation as a very sick interpretation of the normal actions of motherly affection. I hope that everyone, male or female, derives pleasure from the affections of their children. There is nothing wrong with that. As for the Angel Gabriel being portrayed as `an unshaven child molester', I have no memory of such a character in the film behaving that way or of any character whom I identified as the Angel Gabriel, but perhaps that is a reflection of the fact that although I attended a Christian school I have not maintained an absorbing interest in biblical details. Senator Crichton-Browne —He was a baddie. Senator ZAKHAROV —Senator Crichton-Browne will have to tell me about him. Allegations have been made about shocking nudity. The only nudity I can recall in the film was a totally non-erotic scene where Marie is looking in wonder at the changes to her own body brought about by pregnancy, which is a feeling I am sure all women who have had children would share; certainly not what has been implied about it. I mention a few of the other phrases which have been ascribed to the film, all by people who have not seen it: `A gross piece of rubbish', `trash', `a hopelessly boring art film', `offensive' and `porno blasphemous'. The last remark was made in this chamber yesterday. Again, all those people had not seen the film. I have received no letters of complaint, but maybe that is because the film festival where, I understand, the film will be shown for the first time next week is in Sydney. It is interesting that that sort of interest has not been shown elsewhere. Finally, speaking as a psychologist, I find it clinically interesting-perhaps that is the politest way to put it-that people have interpreted the film and have made quotations about it such as `trash', `porno blasphemous'-whatever that might mean-and so on. I am also very disappointed that so many Australians could be so easily misled into canning a film about which they have obviously very little knowledge and certainly no direct knowledge. Senator COLSTON(Queensland)(10.43) —Over the past 12 months or so I have met some people who have gone to Queensland but have returned to their home States because they could not find work. As a senator for Queensland this distresses me. Those people have seen Queensland as a State of opportunity, but have been disillusioned when they have reached there. Queensland is a State of opportunity, but it is being held back by the current National Party Government in Queensland. This evening I wish to outline to the Senate how the mismanagement of the State's economy has resulted in a loss of jobs in a Commonwealth instrumentality. I have been informed that at least 100 jobs will be lost in Telecom Australia over the next financial year in Queensland. Telecom has planned not to fill 107 technical positions in Queensland during the next financial year, due principally to the decline in the Queensland economy. More than 100 jobs in the technical section alone which will become vacant through natural wastage will not be filled. As the jobs will be lost through natural wastage, no one who has a job at the moment will be in danger of losing his job, but because those 100 jobs in the technical section will not be filled, job opportunities will be severely limited for the remaining employees. Naturally, this is a matter of some concern, both to Telecom and to the principal union, the Australian Telecommunications Employees Association. The ATEA has taken up this matter with Telecom and is committed to maintaining existing staff levels. It is my information that ATEA is recommending to Telecom to take on additional work to compensate for the decreasing demand for Telecom services in Queensland. This decline is directly related to the precarious and uncertain state of the Queensland economy. It is not often mentioned, but the rate of new telephone connections is widely accepted as an indicator of economic performance. Keeping that in mind, for the three months to March this year Queensland had a decline of 19.4 per cent in new telephone connections compared with the figure for the same period the year before. This was by far the worst result of any State. The rate of new telephone connections is just another indication of how Queensland is lagging behind the rest of Australia in economic performance. It is because of this that Telecom has been forced to look at not filling the 107 technical positions in the next financial year. The ailing nature of the Queensland economy has been documented for some time. It has been documented in this chamber and in public statements in Queensland by a number of people, including most recently one of the National Party's own trustees. Queensland businesses and employees are now beginning to feel the effects of an economically illiterate State government. Queensland residents should not assume that Telecom is the only employer affected by the State's sick economy. The effects of the Bjelke-Petersen Government's economic ineptitude are widespread and becoming more apparent. No employer in Queensland can remain unaffected by factors such as Queensland suffering a record number of bankruptcies, a dramatic increase in industrial disputes and unemployment rising against the national trend. I mention this matter tonight because it is not often recognised that the economic situation in Queensland is reaching into businesses and now into Commonwealth instrumentalities. It is a matter of concern to the Commonwealth instrumentality and the union that covers people in Telecom that this sort of thing is happening in Queensland. I am not sure what we, as a Commonwealth government, can do to arrest the situation that has occurred in Queensland, quite against the trend throughout Australia. However, I urge the National Party Government in Queensland, in its dying days in office, to look at what is happening in Queensland to see whether, in the few months that it has left in office, it can reverse those trends. Senator GARETH EVANS(Victoria-Minister for Resources and Energy)(10.47) —I congratulate Senator Zakharov on her very level headed and sensitive contribution on the subject of the film Hail Mary as to which she is infinitely better informed than any other parliamentarian and most of the ecclesiastics who have so far contributed to this discussion. She is better informed insofar as she alone it seems, among all those who have raised their voices or the ones we have heard about most noisily, has actually seen the film. I think her speech was a very useful antidote to some of the conspicuously ill-informed, foaming and frothing that we have heard on this subject and I hope that it will be very widely read, although I suppose it is not likely to be any more evident to the public eye than any other speech that is made at this hour of the night. Similarly, I hope that Senator Colston's speech, a compassionate account of yet another devastating inadequacy on the part of the Queensland Government, will also be widely noticed. The deterioration in the quality of government in that State is all too conspicuous and Senator Colston is to be congratulated on drawing it to public attention, as he regularly does. Question resolved in the affirmative. Senate adjourned at 10.50 p.m. The following papers were tabled: Australian Bureau of Statistics Act-Australian Bureau of Statistics-Proposal 1986 No. 6-Survey of stocks of unsold wool. Defence Act-Determination 1986 No. 29-Airconditioning Allowance and Recreation Leave. Migration Act-Regulations-Statutory Rules No. 117. Navigation Act-Navigation (Orders) Regulations-Marine Orders 1986 No. 3-Part 50 (Special Purpose Ships). Governor-General's Proclamations-Commencement of Acts and Sections of Acts: Proclamations by His Excellency the Governor-General were tabled, notifying that His Excellency had proclaimed the following Acts to come into operation on the dates specified. Trade Practices Revision Act 1986-All provisions other than Sections 1, 2, 31 and 35, sub-sections 49 (1), 51 (1) and 64 (1) and Part III-1 June 1986 (Gazette No. S 251, 30 May 1986). Trade Practices (Transfer of Market Dominance) Amendment Act 1986-1 June 1986 (Gazette No. S 251, 30 May 1986). The following answer to a question was circulated: (Question No. 1000) Senator Vigor asked the Minister representing the Minister for Territories, upon notice, on 20 March 1986: (1) Is the Australian Capital Territory (ACT) Building Manual currently available for purchase; if so, what arrangements can people from outside the ACT make to purchase a copy, and to receive an update service automatically; if not, when was the ACT Building Manual last available for purchase, and what additional arrangements have been made since then to assist those needing detailed building information. (2) When is it expected that the Manual will again be available. (3) Where may copies of the ACT Building Manual be inspected. (4) What restrictions are there on access to the Manual in these places. Senator Gietzelt —The Minister for Territories has provided the following answer to the honourable senator's question: (1) Yes. The 1986 Edition of the ACT Building Manual has been available since 8 May 1986. People from outside the ACT may purchase a copy through the Australian Government Publishing Service Bookshops in all capital cities or through the mail from the AGPS Mail Order Services, GPO Box 84, Canberra ACT 2600. The 1986 Edition of the ACT Building Manual includes all previous published amendments made to the Manual since 1974. The Manual is to be republished each year and consequently an update service is not required. (2) See 1. (3) Copies of the Building Manual may be inspected at the public counter of the Building Section, Department of Territories, First Floor, North Building, Civic Offices, London Circuit, Canberra City. Other copies are available for reference at branches of the Canberra Public Library Service. (4) No restrictions are placed on access to the Building Manual at those places. The cost of answering this question is estimated at $21.00.