Northern Territory Second Reading Speeches

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DEBITS TAX AMENDMENT BILL 2002

(This an uncorrected proof of the daily report. It is made available under the condition that it is recognised as such.)

Madam Speaker, I move that the bills be now read a second time.

The bills seek to put in place a package of measures announced as part of the 2002-03 budget. They are the tools to deliver on the promises of this government and to ensure that we invest for tomorrow. These bills are about encouraging home ownership and about equity and fairness in the tax system.

Specifically there are five bills proposing amendments to the Taxation (Administration) Act, Stamp Duty Act, Debits Tax Act, Mineral Royalty Act and Pay-roll Tax Act. The key proposals involve delivering on our election promises to make home purchase easier and include reforming the stamp duty concessions available to Territory home buyers by increasing the stamp duty concession threshhold for first home owners from $80 000 to $125 000; raising the maximum concession from $2096 to $3640.60; refining the eligibility criteria for the concession by aligning it broadly with those of the $7000 first home owner grant; and introducing a new $1500 stamp duty rebate for all other home buyers for the purchase of a principal place of residence. The measures also include the introduction of a stamp duty exemption for the transfer of dutiable property within a corporate group, and reduce the stamp duty payable on the grant and renewal of franchises.

I will now address the measures included in the Taxation (Administration) Amendment Bill 2002 and the Stamp Duty Amendment Bill (No.2) 2002 in more detail. Prior to the 2001 election the government made a commitment to increase the first home owners’ stamp duty concession threshhold from $80 000 to $125 000, increasing the maximum first home buyer stamp duty concession from $2096 to $3640.60. This measure was expected to provide $2.9m in extra assistance to Territory home buyers. In addition, the bills include changes to the first home buyers stamp duty concession criteria to ensure the assistance is more appropriately targeted to true first home buyers.

Currently, the concession is available to any person who purchases their first home in the Territory. This applies even when a person has previously owned a home elsewhere in Australia. Accordingly, the bills broadly align the eligibility criteria of the concession with the First Home Owner Grant Act. This change has the effect of costing less than the $2.9m originally pledged in our pre-election promise. However this saving will be channelled into a new stamp duty rebate of up to $1500 for all Territory homebuyers who are not purchasing their first home.

The increase to the First Home Owner Concession and the new $1500 Principal Place of Residence Rebate will allow more Territorians to pay less stamp duty on the purchase of their home than under the former scheme. We will see the Territory stamp duty on the purchase of a family home fall well below the national average to be one of the lowest in the nation. This delivers on our promise. Both of these concessions are to apply to contracts to buy land that are signed on our after 20 August 2002, being the date this measure was announced as part of the budget.

The bills will also ensure stamp duty on the grant or renewal of a franchise will be assessed at the lease duty rate of 50¢ per $100 rather than at the higher conveyance duty rates. The measure recognises the similarities between a lease of land and the grant of a franchise. This will represent a cut of up to 90% of the duty payable on the grant or renewal of some franchises. However it is proposed that the subsequent transfer of a franchise by a franchisee to a third party, to a trust or back to the franchisor will continue to be assessed at conveyance duty rates.
An anti-avoidance provision has also been inserted to provide for the instance where franchise rights are surrendered by the franchisee so that similar rights may be granted to another person by the franchisor. This will prevent conveyance duty being avoided through the surrender and grant of franchise rates compared with the direct transfer from the franchisee to a third party. This measure is to commence from the 20 August 2002, being the date it was announced as part of the budget.

There are instances where it is not possible to rearrange the ownership of property into more efficient structures within a corporate group without incurring stamp duty. To rectify this problem, the bills propose an exemption from stamp duty for the reconstruction of property within certain tightly held corporate groups. Similar exemptions have been introduced by all states other than South Australia and Tasmania. The exemption will be available to transfers of property between companies that are tightly held members of corporate groups - that is, where there is 90% or greater ownership. Similarly the insertion of a new dormant corporation into a group structure subject to certain guidelines will also be exempt from duty. However, in order to reduce avoidance opportunities and the complexity of the provisions this exemption will not be available to companies that are trustees.

In order to qualify for an exemption for a transfer of group property, a company must be a group member for three years before the transfer of the property or be a member of a group prior to the original acquisition of the property by the group. In addition, for the transaction to remain exempt, the transferor and transferee must remain members of the group for three years after the conveyance unless the are deregistered or publicly floated.

In a circumstance that a company was transferred out of the group within the three years, the exempted stamp duty will be collected from the company’s original group. It is expected that this exemption will result in a backlog of corporate reconstruction transactions as groups take advantage of the exemption to allow for more efficient structures, however these transactions will have a minimal impact on stamp duty collections as the generally would not have occurred under the existing stamp duty rules. The corporate reconstructions exemption is to commence from the date of assent.

Stamp duty avoidance schemes that use land-rich companies and unit trusts are becoming increasingly prevalent in the Territory. In many instances what would normally be a simple transfer of property is instead processed through a change in ownership in the company or trust that owns the property for the predominate purpose of avoiding stamp duty. The land-rich provisions provide a mechanism to cause the transfer of a major 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 60% or more of the assets of the company or trust comprising land or mining tenements subject to certain criteria. These provisions ensure the indirect transfer of land and mining tenements by way of an unlisted company or unit trust is taxed as if the ownership of that property was transferred directly.

The Territory, as with all other jurisdictions, has provisions to deal with schemes involving the use of land-rich companies and unit trusts. Court decisions and avoidance schemes have led to the land-rich provisions being defeated in the Territory and elsewhere. Accordingly, the bills provide five measures that are designed to discourage the manipulation of companies and unit trusts to avoid the land-rich provisions.

The first measure ensures that the entry into any arrangement, including a lease for less than market rental, which has the effect of reducing the value of land and mining tenements owned by a company or unit trust, shall be disregarded for the purpose of the land rich provisions.

However, where there are reasons for the arrangement, other than for the reduction or avoidance of stamp duty, the amendments permit the Commissioner to allow the arrangements to persist. This amendment is necessary following a decision of the Victorian Supreme Court. The second measure ensures that the purchase of partly paid shares or units in a land rich company or unit trust will be treated as though they were fully paid when determining whether there has been a majority acquisition in that company or trust. This amendment is necessary following a decision of the Queensland Supreme Court.

The third measure extends from 12 months to 3 years the period in which incremental purchases of shares or units will constitute a majority acquisition for the purpose of the land rich provisions. The three year period is considered to be more of a deterrent for schemes structured to defeat the land rich provisions. Moreover, this change aligns the Territory’s land rich provisions with the majority of other states. As a transitional measure, the bills cause the 3 year limit to only apply to new acquisitions following the day of commencement.

The fourth measure counters lands rich avoidance schemes based on the lack of clarity in the operation of the land rich provisions when a contract has been entered into to buy or sell land or mining tenements. To rectify this problem, the amendments cause both the vendor and the purchaser to be the owner of the land at the time of entering into the agreement. However, the amendments include the ability for a refund to be provided to a vendor where the sale agreement is settled, or to the purchaser where the sale agreement is rescinded subject to it not being a tax avoidance scheme.

The final measure enables the Commissioner to react to avoidance schemes by excluding assets that belong to a company or unit trust in determining whether that company or trust is land rich without the need for an amendment to the regulations. This ability to exclude assets without the need for regulations is in line with all other states.

The amendments also rectify a minor inequity in the land rich provisions by ensuring that land rich duty is only payable on the amount of an interest acquired as a result of the acquisition of the majority interest. As these amendments are anti-avoidance measures, they are set to commence from 20 August 2002, being the date of their announcement as part of the budget.

Stamp duty is imposed on the acquisition of the unencumbered value of the dutiable property held by a partnership upon the acquisition of an interest in the partnership. However, the stamp duty legislation does not adequately explain how the acquisition of a partnership interest in the underlying dutiable property is triggered or valued. In some instances, this uncertainty could lead to the inequitable application of the stamp duty laws. Accordingly, the bills provide a clear set of rules as to how partnership interests are to be dealt with for stamp duty purposes.

The new rules include a clear definition of what comprises a partnership interest, what constitutes an acquisition of such an interest, and how these acquisitions are to be assessed on the formation and dissolution of a partnership. They also ensure partners’ interests are taken into account when assessing any duty payable on the merger of two or more partnerships, or in the retirement of a partner, and that an acquisition is not subject to duty where interests are altered solely as a result of a partner’s performance. The partnership provisions are to commence from the date of assent.

The bills also include changes to the way stamp duty is imposed on hiring arrangements. These include the exclusion of hiring arrangements where an operator is provided with the goods hired, effective from 18 July 2002 as previously announced, and extending the $9000 stamp duty cap to special hiring arrangements, being written arrangements to specify the nature and quantity of goods to be hired and which do not provide for the substitution or addition of goods. However, this will not include master lease arrangements as they do not meet these criteria, and this amendment is to commence from the date of assent.

There is a stamp duty exemption available where marital property is split as a result of a Family Court order. However, the exemption does not apply where marital property has been split prior to the issue of that order. As such, the bills allow stamp duty to be refunded if within 12 months of the conveyance the Family Court seals orders that are consistent with the conveyance of dutiable property between the spouses. This provision is to commence from the date of assent.

The bills also provide a number of minor administrative and technical amendments that enhance the efficiency and equity of the stamp duty scheme
· in all instances they are to commence from the date of assent. The changes ensure that nominal duty of $20 is payable in respect of a range of transactions involving managed investment schemes on which double duty could otherwise be payable. Nominal duty, instead of conveyance duty, is also payable where a scheme replaces a custodian or manager, without a change in the interest of scheme members;
· clarify that voluntary transfers of business, pursuant to the Financial Sector (Transfer of Business) Act of the Commonwealth are subject to duty where property is conveyed. However, duty will not apply where the transfer of business has been compulsorily acquired under the act;
· ensure the stamp duty exemption that applies on the grant of an estate of land from the Crown only applies where the grant does not have the effect of transfer from a third party;
· remove an exemption from stamp duty on policies of insurance, upon property of the Territory government, for competitive neutrality reasons;
· clarify that reasonable outgoings under a lease of land are not rigged for the purpose of assessing duty;
· ensure instruments that are deemed to have the effect of a deed by the Land Title Act are not subject to deed duty;
· allow the Commissioner of Taxation to communicate information to Motor Vehicle Registry employees for the purpose of administering stamp duty on transfers of motor vehicle registrations; and
· abolish stamp duty on the transfer or reinsurance of life insurance.

I now turn to the Pay-roll Tax Amendment Bill (No 2). As you are no doubt aware, our major payroll tax initiatives were included in a Pay-roll Tax Amendment Bill which was passed in these sittings. This second bill contains an administrative amendment to clarify that the term ‘person’ includes a partnership, for the purpose of the Pay-roll Tax Act. This amendment commences from the date of assent.

The Debits Tax Amendment Bill aligns the compliance powers of the Debits Tax Act with those of other taxing acts; converts court imposed penalties to penalty units and increases these penalties in line with contemporary values; and ensures a financial institution that promotes the shifting of bank accounts outside the Territory to avoid debits tax is jointly and severally liable with account holders for the debits tax avoided. The first two changes commence from the date of assent, and as the last is an anti-avoidance measure, it commences from the 20 August 2002, being the date it was announced as part of the budget.

I turn now to the Mineral Royalty Amendment Bill, which proposes to:

· allow the secretary to extend the time in which a royalty payer may lodge an objection, where the royalty payer has a reasonable excuse for failing to lodge an objection within the 30-day period. However, this amendment is not to apply to an objection where the time period for the lodging of the objection has already expired at the date of the commencement of the amendment;
· simplify the calculation of late payment interest;
· allow the secretary to impose additional royalty on the issue of a default assessment;
· clarify that a person who administers the Mineral Royalty Act is able to release relevant information to the Aboriginal and Torres Strait Islander Commission in relation to royalties received from the holders of mining tenements on Aboriginal land. This information allows the commission to fulfil its statutory obligations towards calculating the royalty equivalents, under the Aboriginal Benefits Account for distribution to its relevant members;
· and aligns the secrecy provisions with the Territory’s taxing acts by ensuring a person who administers the Mineral Royalty Act cannot be compelled to provide evidence in a court, except where it is necessary as part of the administration of the act.

These amendments are to commence from the date of assent.

Madam Speaker, I commend these bills to honourable members.

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