Territorians

And Taxation

Further Light on an Unpleasant Subject

TAXATION has been exercising the minds of residents of Papua and New Guinea recently.

People domiciled in Australia’s Pacific Territories are free of the punishing taxa tion which is imposed upon persons resi dent in Australia. It is one of their few cherished privileges. Naturally, they are sensitive on the subject.

A statement made during his visit in April by the new Minister for Terri tories—that Territorians could not expect indefinitely to enjoy freedom from direct taxation—was received with something akin to horror. There have been no fur ther indications of any move to impose direct taxation; but Territorians should refrain from cheering until the next Aus tralian Budget is out of the way.

Meanwhile, the Australian Taxation Commissioner has been very busy, and has caused some resentment among Ter ritorians by his demands.

Question Of Domicile

IN July, an Australian named Charles Hall appealed to the Supreme Court against income tax imposed upon him in respect of monies paid to him by Aus tralia while, during the war, he was em ployed in small ships in New Guinea waters. This was regarded as a test case: many other persons were awaiting the outcome of the appeal.

Mr. Justice Herron ruled that earnings by Australians in New Guinea were tax able, if the employee entered into a con tract of service in Australia. Hall was ordered to pay.

This caused a flutter in some quarters.

There are many persons in New Guinea who are earning incomes on contracts made in Australia, but who regard them selves as clear of income tax. Were they to be taxed?

Inquiries indicated that the matter turns on the question of domicile. It is clear beyond doubt that persons domiciled in New Guinea and Papua may not be taxed on the income they earn while so domiciled. New Guinea public servants, for example, are clear of all income tax liability: yet many of them are serving under contracts made in Australia with Australian Departments.

Mr. Hall could not claim that he was domiciled in New Guinea, although he spent a lot of his time in New Guinea waters. He is in the same position as the personnel of Australian-registered ships running between Australia and the Islands. They may spend three quarters of their time outside of Australian waters; but they are all obliged to pay income tax.

Some Territories residents get income from produce sold in Australia; others from investments in Australia; and cer tain of these have been wondering whether their position is secure. It ap pears to be. Australian income tax may be imposed only on persons who are do miciled in Australia. Residence in Aus tralia’s Pacific Territories, including Norfolk Island, is not held to constitute an Australian domicile.

Tax On “Compensation” Interest

THE position of those Territorians who have had income tax claims made upon them in respect of interest paid on War Damage compensation has been somewhat clarified.

This claim by the Taxation Commis

sioner has been bitterly resented by many Territorians-especially by those whose homes were completely destroyed by war time operations, and who had no income other than the interest on compensation awarded them.

It was reported last month that Mr.

Spender, Minister for Territories, had taken the matter to Mr. Fadden, Com monwealth Treasurer; and that Mr Fadden had gone to the Taxation Com missioner, who insisted that he had a right to collect the tax. It was then proposed to set up a committee of Territories resi dents to fight the matter on both Parlia mentary and law-court levels.

Since then, the opinion of taxation ex perts has been taken, and they say the Act is quite clear: as the compensation was paid in Australia, and the interest was earned in Australia, the amount is taxable in Australia. It is acknowledged that this legal interpretation is not in accord w r ith justice—but there it is. There is little chance of the Act being amended; and, if it were, it would not be amended to cover payments of income tax already made.

It is learned, also, that the War Damage Commission got the opinion of learned counsel, which was that the interest pay ments were taxable. The Commission, which treated most Territorians with generosity and consideration, was not happy to see the Australian tax-gatherer grabbing at those interest payments, but it could do nothing.

Former Territorians who decided not to return to the Territories after the war, and became domiciled in Australia, cannot now legally resist the payment of income tax on interest attaching to any war damage compensation they have received.

Territorians who resided in Australia only because they were evacuees or re fugees from the war area, and who re turned to the Territories as soon as it was practicable for them to do so, and who never claimed any privileges as Aus tralian residents, naturally resent the attempt to collect any tax in respect of their war damage compensation. Some taxation advisers have said that if such persons are again residents of the Terri tories, and simply ignore the demands of the Australian tax-gatherer, there is very little the latter can do about it. The Territorian’s action may be legally un tenable, . but he has justice on his side.

There are many women now resident in Australia who lost their all in the war in New Guinea—their breadwinners, as well as their homes. Many of these, being in poor circumstances, spent the com pensation interest never dreaming it would be taxed. Payment of the tax now de manded would represent, to them, a real hardship. Taxation advisers say that, for them, Section 265 of the Taxation Act (“Claim on account of hardship”) is clearly applicable. Women who consider that this demand for taxation is imposing a hardship and an injustice should take the necessary steps to appeal under Sec tion 265.