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I now turn to the Pay-roll Tax Act; Taxation (Administration) Act; and Stamp Duty Act amendments. The
bills seek to put in place a package of measures announced as part of the 2000 - 2001 budget.
This speech is quite lengthy, due to the significant number of amendments contained in the bills.
Specifically, there are three bills proposing amendments to the: Pay-roll Tax Act; Taxation (Administration)
Act; and Stamp Duty Act.
The key proposals involve reducing the pay-roll tax rate from 6.75% to 6.6%, and increasing the stamp duty
rates on hiring arrangements from 1.5% to 1.8% and general insurance premiums from 8% to 10%.
In addition, the measures propose that certain payments by labour hire firms to their workers are included in
the pay-roll tax base, indemnity insurance premiums are subject to ad-valorem stamp duty and amounts
received in respect of hire purchase arrangements are subject to stamp duty as hiring arrangements.
Collectively, these measures are expected to increase revenue collections by approximately $2.2 million.
Mr Speaker, the bills also propose amendments to counter several stamp duty avoidance schemes and which
will enhance the fairness and efficiency of the Territory’s taxes. These amendments are in line with this
government’s commitment to ensuring the Territory’s own source revenue base remains sound.
I will now address the Pay-roll Tax amendment bill in more detail.
The bill proposes a commencement date of 1 July 2000.
The first pay-roll tax measure is the reduction of the pay-roll tax rate from 6.75% to 6.6% which is expected
to reduce pay-roll tax revenues by an estimated $2.1 million. This rate compares more favourably with the
pay-roll tax rates in other jurisdictions.
The second pay-roll tax measure clarifies that a pay-roll tax liability exists for labour hire firms in respect of
remuneration paid to persons engaged by them to provide services in whole or in part to their clients.
Generally speaking, a pay-roll tax liability arises where wages are paid in respect of the traditional
relationship between an employer and its employee. Recent judicial decisions have cast doubt on the
existence of this relationship between a labour hire firm and its workers. However, the proposed
amendments will not impose pay-roll tax where a labour hire firm engages the services of a truly
independent contractor.
For example, where a person is engaged on a contract basis such that the person bears all the risk and
responsibility for the services or result required under the contract, the contract will not be considered to be
subject to pay-roll tax.
The bill also includes an anti-avoidance provision to ensure labour hire firms cannot avoid pay-roll tax by
disaggregating wages through trust arrangements. Furthermore, the bill ensures that a double incidence of
pay-roll tax cannot arise where an entity hires staff to a labour hire firm who then on-hires that worker to a
client.
The bill proposes that these amendments apply in respect of wages paid or payable from 1 July 2000.
However, where a labour hire firm has prepaid its workers on or after the date of the budget announcement,
in respect of work to be performed on or after 1 July 2000, the provisions will apply from 16 May 2000 being
the date of the budget announcement. Moreover, the legislation also ensures that nothing in the pay-roll tax
act shall prevent a labour hire firm from recouping their pay-roll tax liability from its clients.
The third pay-roll tax measure proposed by this bill is intended to address an existing anomaly concerning
wages paid to overseas employees.
Generally, a liability arises in the Territory where either services are rendered wholly in the Territory,
regardless of where the wages are actually paid or payable, or where wages are paid in the Territory in
respect of services which are not rendered wholly in another jurisdiction.
Where an employer who is liable for pay-roll tax in the Territory has employees working in another country,
but those wages are paid to the credit of a bank account in the Territory, the wages of those employees are
liable to pay-roll tax. If the wages were paid directly to an overseas account of the employee, no pay-roll
tax liability would arise.
The government recognises that it is inequitable and inefficient for a pay-roll tax liability to depend merely
on whether an overseas employee’s wages are paid to an account in the territory or another country.
As such, the proposed amendment seeks to address this anomaly by providing an exemption after six months,
where wages are paid to a person in the Territory in respect of services performed wholly in another country
for a continuous period of six months.
The six-month qualifying period is included to ensure that the exemption only applies to genuine overseas
employees. The qualifying period is consistent with that applying in New South Wales, Queensland,
Victoria, South Australia and Western Australia, which all offer relief in similar circumstances.
The remaining two pay-roll tax measures included in this bill seek to clarify the application of the act and to
improve its administrative operation.
The pay-roll tax act requires objections to be lodged within 60 days after the date of assessment, however,
the existing legislation provides no means to allow the commissioner to extend the 60-day time period.
To provide greater flexibility to taxpayers, the amendments will permit the 60-day time period to be extended
where the taxpayer has a reasonable excuse for failing to lodge an objection by the due date.
Moreover, the bill also allows interest to be payable where a taxpayer has paid a pay-roll tax assessment
that is subsequently refunded as a consequence of an objection being allowed or an appeal being upheld.
The bill proposes that interest is payable at the same rate as that payable in similar circumstances under the
Income Tax Assessment Act of the Commonwealth.
The bill also seeks to extend the time in which pay-roll tax returns are to be lodged from 14 days to 21 days
after the end of a month. The measure will reduce compliance costs for taxpayers as it coincides with the
payment date for monthly remitters under the Commonwealth’s new pay-as-you-go payment regime.
I will now address the amendments proposed by the Taxation (Administration) Amendment bill in more
detail.
This bill is in 8 parts of which I will discuss each separately.
The first part provides for the commencement of the bill. The commencement date is set for 1 July 2000 for
the majority of the provisions in the bill. However, the bill contains anti-avoidance measures which will have
a commencement date of 16 May 2000, being the date of their initial announcment as part of the budget.
Part 2 of the bill proposes four anti-avoidance measures.
The first measure relates to the stamp duty “land rich” provisions and how they apply to mining tenements
and mining information relating to such tenements. Normally, stamp duty applies at the conveyance duty
rate of 5.4% where ownership of land is conveyed directly between buyer and seller. However, where a
company or unit trust holds land, it is possible to transfer ownership of the land indirectly by transferring the
shares in the company or the units in the unit trust. Such a share or unit transfer will incur duty at a rate of
0.6% which is significantly less than the conveyance duty rate.
The “land rich” provisions provide a mechanism to cause the transfer of the majority interest of shares in a
“land rich” corporation or units in a unit trust to be subject to duty at the higher conveyance duty rate. A
“land rich” corporation or trust is characterised by the majority of the assets of the company or trust
comprising real property subject to certain criteria.
These provisions ensure the indirect transfer of real property by way of an unlisted company or unit trust is
taxed as if the ownership of the real property was transferred directly. A direct conveyance of a mining
tenement and mining information is also subject to stamp duty at conveyance duty rates. However, it is
arguable as to whether mining tenements and mining information are caught within the “land rich”
provisions. To remove any doubt, the bill proposes an amendment to ensure mining tenements and mining
information relating to such tenements are caught by the “land rich” provisions.
The second anti-avoidance measure proposed by the bill relates to a stamp duty avoidance scheme that
operates by way of a declaration of trust to effect a transfer of property between two parties.
The scheme survives on a technical anomaly in the Taxation (Administration) Act. While this anomaly has
not been tested in the court, the bill proposes to ensure that duty applies where property is transferred by
way of a declaration of trust.
The third anti-avoidance measure proposed by the bill relates to another stamp duty avoidance scheme
whereby a seller and a purchaser of property enter into simultaneous put and call options to avoid or delay
the payment of stamp duty.
The bill proposes amendments to counter such schemes by deeming such an arrangement to be subject to
stamp duty as if the property over which the put and call options are made was transferred between the
parties. The duty will be assessed on the total consideration payable for the options including any option fee
or the market value of the underlying property, whichever is the greater.
However, where the options expire without being exercised, the parties may with 90 days apply for a
reassessment of the duty. Where this occurs, the agreement will be subject to stamp duty as if it were an
option and not a transfer of dutiable property. As such, any excess stamp duty paid will be refunded where
necessary.
The fourth measure is a response to a decision in the Supreme Court of Victoria, which held that a lease was
not an encumbrance for the purposes of determining the “unencumbered value” of dutiable property. This
decision allows a method of avoiding stamp duty that would normally arise by the parties first entering into a
lease with nominal rent to reduce the value of the property.
The bill proposes amendments to ensure that the entry into any arrangement (including a lease for less than
market rental) which has the effect of reducing the value of dutiable property, shall be disregarded for the
purpose of calculating the duty payable.
The bill includes the ability for the commissioner to allow an arrangement to persist where there are
commercial reasons for the arrangement other than for the reduction of stamp duty.
Part 3 of the bill clarifies the stamp duty nexus arrangements as they apply to policies of insurance.
Stamp duty is currently payable on insurance policies written in the Territory. In contrast, the practice in
all other jurisdictions (except Tasmania) is for duty to be collected on the basis of the location of the risk
insured. In the case of duty imposed on life insurance policies, duty is payable on the ordinary place of
residence of the insured, and for general insurance, on the location of the property insured.
The difference in treatment causes double duty to be technically applicable where a contract is written in the
territory over a risk located in another jurisdiction.
The current legislation provides no relief from duty being imposed in both the Territory and the other
jurisdiction.
Insurers who operate in the Territory currently return duty on insurance policies under the “location of risk”
basis. This arrangement is administratively accepted as a reasonable alternative to double duty. More
specifically, general insurers who underwrite property used in several jurisdictions (eg. Aircraft) apportion
duty payable across jurisdictions under an agreed schedule of apportionment.
The bill proposes amendments that ensure duty is imposed on the basis of the location of the risk insured and
allows for the apportionment of risks that extend outside of the Territory.
Part 4 of the bill provides a new method of assessing stamp duty on commercial lease contracts to improve
the administrative operation of these provisions.
Stamp duty is imposed on commercial lease documents on the basis of the amount of rent paid under the
lease. In some instances, rent components are included which are unascertainable at the time of
assessment.
Such rents include rent based on turnover, or market based rents. Where a lease is presented for stamping,
stamp duty is not assessed on unascertainable rent at that time. Leases that include unascertainable rents
are required to be resubmitted for assessment when such rents have crystallised.
This is problematic on three fronts – the first being the cost of resubmitting and assessing the lease, secondly,
the poor compliance rate of lessees resubmitting leases and thirdly the cost of seeking out leases for
reassessment is excessive.
To resolve these problems, the bill proposes amendments to allow the commissioner to estimate
unascertainable rent at the initial lodgement of the lease. The bill allows lessees to lodge their lease for
reassessment if the estimated stamp duty overstates the stamp duty that would have been paid after the
unascertainable rent has crystallised. This process provides a more efficient method of assessing duty.
Moreover, commercial lease documents generally include the ability to review or increase rent at certain
times within the term of a lease. Where rent is increased as a result of a rent review, the lease document is
required to be reassessed for stamping. Unfortunately, the compliance rate for resubmitting leases is low,
and the cost of seeking the reassessment of rent increases is also prohibitive. The bill proposes amendments
to uplift rents by a CPI based rate where a lease provides for a rent review.
Part 5 of the bill provides three measures that relate to stamp duty on hiring arrangements.
The first measure ensures that stamp duty imposed on hiring arrangements includes hire purchase
agreements. The Australian Finance Conference has made a submission to all states and territories
requesting that they consider imposing stamp duty on hire purchase agreements. They cite the main reason
as the absence of stamp duty on these agreements has created a distortion towards hire purchase
arrangements over other equipment financing mediums.
Hire purchase arrangements have been included in the hiring duty base of New South Wales, Victoria,
A.C.T., Tasmania and Queensland. The inclusion of hire purchase agreements is expected to increase stamp
duty collections by $0.5m. The second measure deals with stamp duty and the hire of video cassettes.
The Taxation (Administration) Act specifically excludes the hire of a motion picture film from hiring duty. A
court decision cast doubt on the application of this exemption to video cassette hires. Despite the decision,
stamp duty has not been collected on this issue in the Territory. This bill amends the act to ensure video
cassette hire is not subject to hiring duty and retain the current practice.
The third measure clarifies the nexus by which stamp duty is payable in the Territory in respect of hiring
arrangements. Stamp duty is currently payable on hiring arrangements in the Territory where the:
Hiring arrangement was entered into in the Territory;
Hired goods are supplied or delivered in the Territory; or
Hired goods may be used in the Territory.
The existing legislation allows a credit where duty has been paid on a hiring arrangement in another state or
Territory. Similar nexus arrangements operate in all other states and the A.C.T.
The present nexus arrangements lack certainty as to where stamp duty is payable, and as such, it is possible
for lenders to determine where they wish to pay duty. This poses a threat as more lenders centralise their
operations toward the larger financial centres and as a result of administrative expedience, return duty to the
larger states.
The bill proposes to clarify nexus arrangements for the payment of duty in the Territory to ensure duty is
rightfully returned to where the goods are used.
The nexus arrangements are to apply in the following manner:
A primary nexus that ensures duty is paid to the Territory on goods that are solely or predominantly used
in the territory. The crediting provision will not apply in respect of duty returned as a result of this
requirement. However, all other jurisdictions provide crediting provisions such that double duty will not
apply; and
A secondary nexus that ensures duty is paid in the territory where a hiring arrangement is entered into in
the Territory or the goods are supplied or delivered in the Territory. The crediting provision will apply
to ensure duty paid in other jurisdictions, if any, will reduce the Territory liability to ensure only one
amount of duty applies.
The only exception applies to the hire of motor vehicles. In this instance, the bill proposes:
A primary nexus, that ensures duty is paid to the Territory where the vehicle is supplied or delivered in
the Territory or it is solely or predominantly used in the Territory. The crediting provision will again not
apply where duty is payable under the primary nexus arrangements; and
A secondary nexus where the hiring arrangement is entered into in the Territory. The crediting
provision will apply to ensure duty paid in other jurisdictions, if any, will reduce the Territory liability
to ensure only one amount of duty applies.
The difference in treatment between goods and motor vehicles is the result of alternate nexus arrangements
that apply in the A.C.T. and New South Wales. The nexus arrangements in those jurisdictions require duty to
be payable where the motor vehicle is registered. The separate treatment accorded to motor vehicles is to
take account of the mobility of motor vehicles across state borders.
The approach proposed by the bill recognises the mobility of motor vehicles by assigning duty to the place of
delivery as opposed to the place of registration. Moreover, the place of registration approach would have a
detrimental effect on Territory revenue collections as some hire companies have their fleet registered in
other jurisdictions.
Part 6 of the bill includes administrative tools that attend to the avoidance and delay of the payment of duty
by persons either not lodging or delaying the lodgment of motor vehicle transfers.
To this end the bill includes amendments that:
Allow the Registrar of Motor Vehicles to refrain from registering a motor vehicle where either stamp duty
has not been paid or the registrar is not satisfied of the value of the motor vehicle which has been
transferred;
Ensure that either the failure by the transferor to make a declaration or the making of an incorrect
declaration in respect of a motor vehicle’s purchase price, is an offence under the act;
Allow the Commissioner of Taxes and the Motor Vehicle Registrar to issue a default assessment including
penalties where a person fails to make an application for transfer in the required time or on-sells the
vehicle without making an application for transfer; and
Impose penalty interest where a payment of stamp duty is delayed due to the failure to lodge an
application for transfer within 14 days of sale.
Part 7 of the bill includes two amendments that relate to stamp duty raised on marketable securities.
The first amendment relates to the collection of duty by brokers operating in the Territory.
The bill proposes to ensure duty on transactions effected by sharebrokers in the Territory are returned to the
territory rather than another jurisdiction. While stamp duty on quoted marketable securities will cease from
1 July 2001 under the commonwealth tax reform initiative, this measure is still considered necessary for the
interim period.
The second amendment proposed by the bill ensures that a share buy-back is subject to duty. This amendment
arises from a decision in the Court of Appeal of Victoria which held that a share buy-back was not subject to
marketable securities duty.
Part 8 of the bill includes a range of miscellaneous amendments that seek to clarify the application of the act
and to improve its administrative operation.
The first measure provides legislative support for the operation of a new self-assessment scheme that is
currently under trial. The scheme allows conveyancing agents and legal practitioners to self assess and
collect the stamp duty payable on their clients’ conveyances of real property. This new scheme will relieve
conveyancers of the requirement of attending the office of the Commissioner of Taxes for each conveyance.
The scheme provides substantial flexibility, efficiency and cost savings to the conveyancing industry as well
as the Commissioner of Taxes.
The scheme is facilitated by the development of a personal computer based software program called the
“conveyance by return” or “CBR” system which automatically calculates the duty, maintains a register of
transactions and generates a monthly return.
The ACT currently provides a mechanism to support the CBR system, however, the bill proposes minor
amendments to fine tune these provisions. The amendments recognise the legal status of “firms” for the
purposes of the scheme and allow the commissioner to set the due date for the payment of duty.
The second measure proposed by the bill allows the commissioner to extend the time period that applies for:
Making an application for a refund of duty arising from the early cancellation of a lease, or where a
contract is rescinded; and
The lodgement of an objection against a decision of the commissioner,
Where there is a reasonable excuse to extend the time period.
The third measure allows interest to be payable where a taxpayer has paid tax that is subsequently refunded
as a consequence of an objection being allowed or an appeal being upheld. The bill proposes interest to be
payable at the same rate as that payable in similar circumstances under the Income Tax Assessment Act of
the Commonwealth.
Finally the bill proposes amendments that allow electronic documents to be admitted as evidence. This
amendment recognises that electronically stored information is becoming more prevalent due to the many
cost advantages.
I will now address the amendments proposed by the third and final bill, the Stamp Duty Amendment bill, in
more detail.
Part 1 of the bill provides for a commencement date of 1 July 2000 for the majority of the measures in the
bill. However, the bill contains an amendment arising from an anti-avoidance measure provided by the
Taxation (Administration) Amendment bill. As such, to coincide with the earlier commencement date of that
measure, part 9 is to commence from 16 May 2000.
Part 2 of the bill amends the stamp duty exemption that applies to certain charitable bodies.
The Stamp Duty Act provides a broad exemption from the payment of stamp duty for public benevolent
institutions, religious institutions, public hospitals or public education institutions. The exemption mainly
applies to conveyance duty and leases.
In many instances, the exemption has been applied to commercial dealings. While it is understood that the
proceeds of such commercial dealings do benefit these institutions, the exemption provides a competitive
advantage to these institutions over other competing businesses.
The bill proposes to restrict the exemption to dealings that have a direct purpose for which the organisation
is established. This will mean a lease or an acquisition of property used for commercial purposes will not be
exempt from stamp duty. However, the exemption will still be available for the purchase of premises that are
used as sheltered workshops and community opportunity shops that are run by these organisations. The
proposed amendment to the exemption is consistent with similar exemptions in the Pay-roll Tax and
Financial Institutions Duty legislation.
Part 3 of the bill provides an increase in the stamp duty rate that applies to policies of insurance from 8% to
10%. The Territory’s general insurance stamp duty rate at 8% is currently one of the lowest in Australia.
This increase will place the Territory’s rate in line with most other jurisdictions.
This part also proposes an amendment that changes the way stamp duty is imposed on indemnity insurance.
Indemnity insurance includes insurance against liability for injury to third parties or property. However, it
does not include the Territory’s Motor Vehicle Accident Compensation Fund provided under the Motor
Accidents Compensation Act.
Stamp duty is currently payable on indemnity insurance at a flat rate of $5 per policy. The bill proposes to
change this approach by imposing ad valorem stamp duty to indemnity insurance at the same rate as that
imposed on general insurance policies. This is consistent with the treatment in most other jurisdictions. This
measure is expected to increase stamp duty collections by $0.2m.
To ensure policies of indemnity insurance are not subject to duty at both the former fixed rate and the new ad
valorem rate during the transition to the new arrangements, the bill proposes that the new ad valorem rate is
to apply on policies of insurance entered into on or after 1 July 2000.
Furthermore, the new rate will apply to an indemnity insurance policy entered into after 16 May 2000, where
the policy of insurance which covers a period commencing from 1 July 2000.
Part 4 of the bill proposes an amendment to ensure all residential leases are exempt from stamp duty. While
there is already a stamp duty exemption for a lease over residential property where the lessee is a natural
person, the exemption does not apply where the lessee is a company. This difference has the effect of
imposing lease duty on company leased accommodation. The bill proposes to extend the exemption to
company lessees of residential properties. The revenue loss is expected to be less than $5,000.
Part 5 of the bill proposes an increase in the stamp duty rate that applies to hiring arrangements from 1.5%
to 1.8%. The new rate is now equal with Western Australia and South Australia, and should increase
revenue collections by $0.5m.
Part 6 of the bill provides for an overall restructure of the exemptions as they relate to transfers of motor
vehicle certificates of registration. The exemptions are currently scattered among the two acts and their
regulations which leads to difficulty in comprehending the legislation.
This part also seeks to clarify the administrative operation of several exemptions.
In the first instance, an exemption is provided for transfers between family members. The current exemption
is unclear as to whether it includes de facto partners. As such, the bill proposes to clarify this issue by
extending the exemption to de facto partners.
In the second instance, an exemption is provided to a motor vehicle that is used exclusively for agricultural
or pastoral purposes not being a vehicle designed primarily and principally for the transport of persons.
The wording of this exemption technically allows the vehicles of any contractors who may not carry on an
agricultural or pastoral business, to take advantage of the exemption. To further clarify the scope of the
exemption, the bill proposes to amend the exemption such that it is only available to persons who carry on an
agricultural or pastoral business.
In the third instance, the bill clarifies the exemption as it applies to certain charitable organisations. Under
the existing exemption, it is unclear whether or not a vehicle registered by these organisations is subject to
stamp duty. While it has been the administrative practice to allow the exemption, the bill proposes to clarify
this situation by ensuring vehicles registered in the name of these organisations are exempt from stamp duty.
In the fourth instance, an exemption was provided to motor vehicle dealers for vehicles purchased for resale
in the ordinary course of their business. Unfortunately, there is a practice of motor vehicle dealers utilising
the exemption for vehicles which are used for personal purposes and other commercial purposes unrelated to
the sale of the vehicle.
The bill clarifies that the exemption only applies to genuine trading stock and not to vehicles used for other
subsidiary purposes. However, the existing exemption did not allow an exemption for vehicles that are
registered purely for demonstration purposes. To clarify this issue, the exemption has been extended to the
registration of a demonstration vehicle.
In the fifth instance, an exemption is provided to persons who are totally or permanently incapacitated where
the vehicle is not for commercial use. It is administratively difficult to determine when a person is totally or
permanently incapacitated. The original intent of the exemption was for it to be available to TPI war
veterans, however, it has been interpreted to apply to any person who is totally or permanently
incapacitated.
As such, the bill proposes to only allow the exemption where a person is eligible to receive the special rate of
pension under section 24 of the Veterans’ Entitlements Act 1986 of the Commonwealth and where the vehicle
is not for commercial use.
Part 7 of the bill seeks to rationalise the categories of nominal duty. Stamp duty is imposed on a wide range
of miscellaneous documents with amounts that range from $5 to $50 per document. After reviewing the
process of stamping these documents, the bill proposes that nominal duty be removed on some classes of
document and for a single amount of duty based on cost recovery principles be imposed on the remaining
classes of documents.
In the first instance, it is proposed that mining agreements, guarantees and letters of power of attorney be
removed as these documents will either fall under another head of duty or it is considered uneconomic to
continue stamping these documents.
In the second instance it is proposed to set an amount of $20 for all nominal duty categories except the
stamping of copies and instruments which are in conformity with an instrument which has been already
stamped with ad-valorem duty. These excluded documents will be stamped at the existing rate of $5.
Under this proposal the new $20 charge will reduce the $50 rate of duty that applies to trust deeds and
leases not subject to ad valorem duty and increase the $5 rate that applies to partitions of land, deeds
generally, instruments of appointment of trustees, instruments to correct errors and instruments relating to
managed investment schemes. The combination of these changes to the nominal stamp duty categories will
increase collections by approximately $0.12 million.
Part 8 of the bill ensures that a full first homeowner stamp duty concession is available to a recipient of
assistance under the Homestart or Homeshare shared equity housing assistance scheme.
A stamp duty concession of a maximum of $2,096 is available to homebuyers on their first home purchase in
the Territory.
In many instances, these homebuyers also utilise a shared equity assistance scheme provided by Territory
Housing. The existing stamp duty concession does not extend to the portion of a home purchased by
Territory Housing under a shared equity scheme. This only allows the homebuyer a proportion of the stamp
duty concession equal to their interest in the property. Nonetheless, a stamp duty waiver is currently
provided for the stamp duty incurred in respect of the portion owned by Territory Housing.
The current arrangements are administratively cumbersome, and as such, the bill seeks to extend the full
amount of the concession to the homebuyer on the purchase of the home. This measure will not affect
revenue collections as it reflects the current administrative treatment.
The last part of the bill is inserted as a consequence of the anti-avoidance provision dealing with certain
declarations of trust. The amendment ensures double duty is not incurred where the new provisions catch a
declaration of trust that is already subject to ad valorem duty.
Mr Speaker, I commend the bills to honourable members.
Debate adjourned.