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1
Duties Amendment Bill 2004
DUTIES AMENDMENT BILL 2004
EXPLANATORY NOTES
GENERAL OUTLINE
Policy Objectives
To amend the Duties Act 2001 to
· implement transfer duty and mortgage duty concessions for first
home buyers announced by the Government during the 2004
election;
· include a general anti-avoidance provision to support the
concessions; and
· introduce an 18 year age requirement which taxpayers must
satisfy to claim the concessions subject to a discretion for the
Commissioner of State Revenue to allow a minor to claim the
concessions in certain circumstances.
Reasons for the Bill
During the 2004 election, the Government proposed the following
additional transfer duty and mortgage duty relief for first home buyers.
· Raising the maximum purchase price for a full rebate of transfer
duty on first home purchases from $80,000 to $250,000.
· Transfer duty on first home purchases above $250,000 will be
reduced by a rebate which is capped at $2,500 and reduces by
$100 for every $10,000 over $250,000. The rebate cuts out
completely for first homes costing $500,000 or more.
· Raising the exempt amount for mortgage duty on a loan for the
purchase or construction of a first home from $100,000 to
$250,000.
The Duties Act 2001 is to be amended to give effect to these proposals,
with the amendments taking effect on and from 1 May 2004.
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Duties Amendment Bill 2004
Due to the delay between announcement and commencement of the
concessions, there is scope for taxpayers to structure transactions to gain
the benefit of the amendments by schemes to defer transactions to a date
after 30 April 2004. An anti-avoidance provision is required to address
these schemes.
Amendments are also required to the Duties Act 2001 to provide that a
taxpayer must be at least 18 years of age if they claim either concession,
subject to a discretion which the Commissioner of State Revenue may
exercise to allow either concession in genuine cases.
Achievement of the Objectives
Transfer duty and mortgage duty
Currently, a concessional transfer duty rate of 1% applies for the first
$250,000 of the consideration for, or value of a home, that is, a person's
principal place of residence. The general rates of duty apply to the excess
price or value over $250,000. Also, for buyers purchasing their first home
for $80,000 or less, a first home transfer duty rebate applies so that no
transfer duty is payable. A reducing rebate, in addition to the 1% home
concessional rate of duty, applies for first home purchases above $80,000.
This rebate cuts out at $160,000.
Currently, first home buyers receive a mortgage duty exemption on the
first $100,000 of the amount secured by a mortgage to buy or build a first
home. Mortgage duty applies for any amount secured above the exemption
limit.
During the 2004 election, the Government announced that the transfer
duty exemption limit for first home buyers would be raised from $80,000 to
$250,000. For first home purchases of more than $250,000, a maximum
$2,500 rebate would apply, reducing by $100 per $10,000 over $250,000
and ending once the value of the first home reaches $500,000. Also, that
the first home mortgage duty exemption limit would be raised from
$100,000 to $250,000.
18 year age requirement
There is currently no age restriction on taxpayers obtaining the benefit of
the first home duty concessions. Consequently, minors may claim the first
home transfer duty concession and the first home mortgage duty
exemption. The announced changes will provide first home buyers with
substantial transfer duty and mortgage duty savings. First home buyers
may obtain a maximum reduction of $2500 in transfer duty or total
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Duties Amendment Bill 2004
exemption and a maximum reduction of $1000 in mortgage duty or total
exemption.
The increased concessions provide greater incentive for abuse by using
minors in first home transactions to obtain the benefit of the concessions
where the real purchaser, such as their parents, would be ineligible for the
first home concessions, as they have previously owned a home. To prevent
potential abuse of these concessions, the Duties Act 2001 is to be amended
to require that taxpayers claiming the benefit of either the first home
transfer duty concession or the first home mortgage duty exemption be at
least 18 years of age.
To cater for genuine circumstances where a minor may purchase a first
home or obtain a first mortgage, a discretion will be conferred on the
Commissioner of State Revenue to allow either concession in those
circumstances. The discretion will be considered on a case by case basis.
Factors for consideration would include the age of the minor, the way in
which the first home purchase is structured, the reason for the purchase, the
living arrangements of the minor and their family, the family arrangements
generally and whether the funds to purchase the first home were
independently sourced.
Examples of where the discretion may be exercised on the basis of the
factors to be taken into account are:
· where a paraplegic child who has obtained funds from a
compensation payment builds a home modified for their medical
needs;
· a 17 year old child who has used funds from an inheritance to
purchase a home in which they will live with their partner.
An example of where the discretion may not be exercised is where
parents acquire a home unit for a young child, either in the child's name or
as trustee for the child, using their own funds to acquire and maintain the
home unit.
Anti-avoidance provision
The Government announced the first home transfer duty initiative on 28
January 2004. As the amendments will commence on 1 May 2004,
taxpayers may seek to structure their transactions to gain the benefit of
these amendments by schemes to defer first home transactions to a date
after 30 April 2004. The Duties Act 2001 is to be amended to include an
anti-avoidance provision to address these schemes.
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Duties Amendment Bill 2004
The anti-avoidance provision will operate so that the Duties Act 2001
first home transfer duty concessions which have effect on and from 1 May
2004 will not apply to certain dutiable transactions made on or after 1 May
2004, where a prior transaction or arrangement is made before that date. A
prior transaction or arrangement includes a pre-existing transfer or
agreement which is replaced by another transfer or agreement for the same
land after 1 May 2004 or an option to purchase land or an option to require
a transferee to purchase land granted before 1 May 2004 and exercised on
or after 1 May 2004.
Arrangements made before 1 May 2004 to defer a dutiable transaction
until 1 May 2004 or later to gain the benefit of the new first home transfer
duty concessions will also mean that the new first home transfer duty
concessions will not apply.
If any of these situations arise, the parties will be able to claim only the
first home transfer duty concessions as they currently stand.
Alternatives to the Bill
The policy objectives require statutory amendment to give them ongoing
effect.
Estimated Cost for Government Implementation
Any additional administrative costs are not expected to be significant.
Consistency with Fundamental Legislative Principles
The Bill confers on the Commissioner of State Revenue a discretion to
allow a person under the age of 18 years to claim a first home transfer duty
concession or first home mortgage duty exemption. This discretion can
only be exercised where the Commissioner is satisfied there is no scheme
to circumvent limitations on, or requirements affecting, eligibility or
entitlement for the concession or exemption in relation to the relevant
transaction. This will enable the relevant concession or exemption to apply
in genuine cases of a minor purchasing a first home or entering into a first
mortgage.
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Duties Amendment Bill 2004
Consultation
The transfer duty and mortgage duty amendments were announced by
the Government during the 2004 election.
Consultation on the anti-avoidance and 18 year age requirement
amendments was not appropriate as the amendments are designed to
minimise any potential abuse in claiming the first home transfer duty
concession or first home mortgage duty exemption.
NOTES ON PROVISIONS
Clause 1 cites the short title of the Bill.
Clause 2 states the date on which the Bill is taken to have commenced.
Clause 3 states that the Bill amends the Duties Act 2001.
Clause 4 amends section 92(1) by adding the requirement that a
transferee claiming a first home transfer duty concession be at least 18
years of age on the day the liability for transfer duty arises.
A new subsection (1A) is included to clarify when section 92 applies.
That is, if section 92(1)(b)(ii) applies, a beneficiary, who is under a legal
disability only because the beneficiary is under 18 years of age, will be
eligible for the first home transfer duty concession in section 92 only if the
Commissioner is satisfied there is no avoidance scheme in relation to the
transaction.
Section 92(2) is also amended to provide that the first home transfer duty
concession amounts are contained in a new Schedule 4A of the Act. New
section 92(3) provides that the Commissioner may exempt a transferee
from the 18 year age requirement if satisfied there is no avoidance scheme
in relation to the dutiable transaction.
A transferee or beneficiary of a first home who cannot satisfy the 18 year
age requirement and who does not have the Commissioner's discretion
exercised in their favour is not precluded from claiming the home
concession under section 91, provided the residence is the home of the
transferee or beneficiary and all other requirements of section 91 are
satisfied.
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Duties Amendment Bill 2004
Clause 5 inserts a new subsection (3A) into section 93 to provide that the
section will only apply in respect of a first home where the relevant
transferee is at least 18 years of age on the day the liability for transfer duty
arises. A new subsection (3B) provides that the Commissioner may exempt
a transferee of a first home from the 18 year age requirement if satisfied
that there is no avoidance scheme in relation to the dutiable transaction.
A transferee of a first home who cannot satisfy the 18 year age
requirement in new subsection (3A) and who does not have the
Commissioner's discretion contained in new subsection (3B) exercised in
their favour is not precluded from claiming the home concession under
section 93, provided the residence is the home of the transferee and all
other requirements of section 93 in respect of claiming the home
concession are satisfied.
A consequential amendment is made to section 93(6A) to reflect the
inclusion of new Schedule 4A in the Act.
Clause 6 inserts a new subsection (3) into section 94 to clarify when
section 93(3A) and (3B) will apply in the case of a beneficiary under a
legal disability. That is, if because of section 94, section 93 applies to a
transaction as if a beneficiary is a transferee of residential land, the 18 year
age requirement will apply to the beneficiary under a legal disability if the
legal disability of the beneficiary is only that the beneficiary is under 18
years of age.
Clause 7 replaces the definition of a "first home borrower" in section
273(2) to add the requirement that the first home borrower be at least 18
years of age on the day the liability for mortgage duty arises. A new
subsection (3) provides that the Commissioner may exempt a borrower
from the 18 year age requirement if the Commissioner is satisfied there is
no avoidance scheme in relation to the home mortgage.
A first home borrower who cannot satisfy the 18 year age requirement in
new subsection (2) and who does not have the Commissioner's discretion
contained in new subsection (3) exercised in their favour is not precluded
from claiming the home borrower exemption under section 274, provided
the borrower is a home borrower and all other requirements of section 274
in respect of claiming the home borrower exemption are satisfied.
Clause 8 amends section 274 to increase the first home borrower
mortgage duty exemption limit to $250,000.
Clause 9 inserts a new subsection (3) into section 275 to clarify when
section 273(2)(b) and (3) will apply in the case of a beneficiary under a
legal disability. That is, if because of section 275, section 273(2)(b) and (3)
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Duties Amendment Bill 2004
apply to a beneficiary as if the beneficiary is a first home borrower, the 18
year age requirement will apply to the beneficiary under a legal disability if
the legal disability of the beneficiary is only that the beneficiary is under 18
years of age.
Clause 10 makes a minor technical change to the heading of Chapter 17,
Part 2 of the Act.
Clause 11 inserts Chapter 17, Part 3 in the Act which contains new
section 551. New subsection (1) contains transitional provisions for the
Bill. This subsection clarifies that the amendments, including the 18 year
age requirement, apply to dutiable transactions and mortgages for which a
duty liability arises on or after 1 May 2004.
New subsection (2) provides that Chapter 2, Part 9, Division 3 of the Act,
as in force immediately before 1 May 2004, will apply to certain transfers
or agreements for transfer of residential land made on or after 1 May 2004,
in the following circumstances.
· Where the transfer, or agreement for transfer of residential land
replaces a transfer, or an agreement for transfer that included the
residential land which was made before 1 May 2004.
· Where the transferee had an option to purchase the residential
land or the transferor had an option to require the transferee to
purchase the residential land granted before 1 May 2004 and the
option was exercised on or after 1 May 2004.
· Where another arrangement was made before 1 May 2004 the
sole or main purpose of which was to defer the making of the
transfer or agreement until 1 May 2004 or later so the new first
home transfer duty concessions would apply in relation to the
dutiable transaction.
Clause 12 inserts new Schedule 4A in the Act which contains the first
home transfer duty concession.
Clause 13 amends Schedule 6 of the Act by inserting a definition of
"avoidance scheme".
© State of Queensland 2004