Northern Territory Explanatory Statements

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TREASURY LEGISLATION AND CONSEQUENTIAL AMENDMENT BILL 2006

· with effect from 2 May 2006, prevent a person obtaining the first home owner grant for an interest that they acquire in a home that they already partly own;
· extend the period in which an ineligible first home owner grant recipient is required to repay the grant from 14 days from receipt of a payment notice to 30 days after a payment notice is issued;
· preserve the future entitlement to the first home owner grant for a person that has been ruled ineligible because they were under 18 years of age;
· specify the “commencement date” as being the time to test a first home owner grant applicant’s eligibility, except for the requirement for a first home owner grant applicant to be an Australian citizen or permanent resident, which will be tested at the time a person lodges an application for the grant;
· align the discretion to extend the 12 month occupancy period for the first home owner grant, with that to reduce the six month residency period, by limiting it to cases where the Commissioner of Taxes is satisfied that special reasons exist;
· extend the first home owner grant objection and appeal periods from 30 to 60 days and allow appeals to the Taxation and Royalty Appeals Tribunal (rather than the Local Court) to provide consistency with the objection and appeal rules that apply to stamp duty first home owner concession applicants;
· clarify that a person is not excused from providing self-incriminating information under the Act; and
· allow disclosure of information gathered under the Act to certain Australian Government agencies.
A consequential amendment is made to the Land Title Act, which is necessary as a result of the abolition of stamp duty on rent paid for the grant and renewal of leases. The abolition of this stamp duty is effected through amendments to the Stamp Duty Act and the Taxation (Administration) Act.

The Mineral Royalty Act is amended to allow for the Minister to appoint a person to the statutory position of “Secretary” under that Act. This will allow the alignment of the position of Secretary with that of the Commissioner of Taxes, such that the person who is the Commissioner will also be the mineral royalty Secretary.

The Pay-roll Tax Act is amended to:

· increase the payroll tax exemption threshold from $1 million to $1.25 million;
· ensure that indirect payments made to company directors and members of the governing body of a company are subject to payroll tax in the same way as indirect payments to employees. Direct payments to directors are already subject to payroll tax and this ameliorates any avoidance opportunities; and
· make it clear that tax assessments and decisions are not susceptible to court challenges where the legislated objection and appeal process is available. Corresponding changes are made to the Taxation (Administration) Act, which also sets out the objection and appeal provisions that apply to decisions and appeals under the Pay-roll Tax Act.
The Stamp Duty Act, the Taxation (Administration) Act and the Taxation (Administration) Regulations are amended to:

· abolish stamp duty on unquoted marketable securities;
· abolish stamp duty on rent paid for the grant and renewal of leases and franchises. Stamp duty will continue to be payable at conveyance rates for certain lease and franchise transactions that are similar to conveyances of dutiable property, including the conveyance of a lease or franchise and the grant of a lease where a premium or only nominal consideration is paid. The continued imposition of duty at conveyance rates for certain lease transactions is in line with the approach adopted by other states under tax reform.
· put in place a revenue protection measure to prevent the refund of duty on the cancellation of leases executed prior to 1 July 2006, where the lessee, or an associate of the lessee, continues to remain in occupation of a substantial part of the leased premises after the lease is cancelled;
· relieve lessees from the requirement to resubmit their lease for reassessment of stamp duty where the rent actually paid under the lease differs from that on which stamp duty has been paid, while enabling a partial refund of duty to be paid where a lessee has overpaid stamp duty in respect of a lease;
· in line with amendments to corresponding legislation applying in Victoria and New South Wales, and publicly contemplated in the Australian Capital Territory:
o extend the application of the stamp duty land rich provisions to acquisitions of interests in unit trusts of 20 per cent or greater;
o broaden the range of unit trusts subject to the stamp duty land rich provisions by redefining the criteria that determine whether a trust falls within those provisions;
o allow interests in subsidiaries of 20 per cent or more to be counted for the purpose of determining the value of land to which a company or unit trust is entitled under the stamp duty land rich provisions;
· align the time in which a stamp duty land rich statement is required to be lodged and any stamp duty paid within the existing 60-day period that applies for other stamp duty conveyance documents;
· prevent the avoidance of stamp duty land rich provisions through the quotation of shares in a corporation or units in a unit trust scheme on a recognised financial market;
· clarify the scope of an exception to the stamp duty land rich provisions so that it more consistently applies in circumstances where a direct conveyance of land would be exempt from duty;
· ensure that stamp duty is not payable on the issue or transfer of a motor vehicle certificate of registration completed solely to rectify an error in another motor vehicle certificate of registration;
· clarify in legislation the assessment of stamp duty on conveyances of part interests in dutiable property;
· clarify that a surrender of dutiable property is dutiable as a conveyance for stamp duty purposes and define what types of actions are surrenders for the purposes of stamp duty;
· cease the sale and use of adhesive duty stamps and, up to 1 July 2007, provide a refund for uncancelled duty stamps upon the surrender of those stamps;
· make it clear that tax and stamp duty assessments and decisions are not susceptible to court challenges where the legislated objection and appeal process is available;
· remove the prohibition against recovering penalties from a person who is prosecuted under the Taxation (Administration) Act;
· reactivate a stamp duty assessment following a refund or remission of stamp duty for a transaction that was not completed and where there is a subsequent sub-sale or conveyance of property by direction;
· with effect from 2 May 2006, remove a legislative anomaly to ensure the intended result that a person is able to obtain either the stamp duty first home owner concession or the stamp duty principal place of residence rebate in respect of a home, but not both;
· preserve the future entitlement to the stamp duty first home owner concession for a person that has been ruled ineligible because they were under 18 years of age;
· specify the date of execution of instruments of conveyance as being the time to test a stamp duty first home owner concession applicant’s eligibility, except for the requirement for a concession applicant to be an Australian citizen or permanent resident, which will be tested at the time a person lodges an application for the concession; and
· align the discretion to extend the 12 month occupancy period for the stamp duty first home owner concession and stamp duty principal place of residence rebate with that to reduce the six month residency period, by limiting it to cases where the Commissioner of Taxes is satisfied that special reasons exist.

The Bill makes minor amendments to the Taxation and Royalty Appeals Tribunal Rules as a consequence of amendments made by the Bill to the First Home Owner Grant Act and the Taxation (Administration) Act which allow appeals from applicants for the first home owner grant to be made to the Taxation and Royalty Appeals Tribunal (rather than to the Local Court).

Other amendments improve the interpretation of these Acts in line with contemporary drafting style.

NOTES ON CLAUSES

PART 1 – PRELIMINARY MATTERS

Clause 1. Short title

This is a formal clause which provides for the citation of the Bill. When passed, the Bill may be cited as the Treasury Legislation and Consequential Amendment Act 2006.

Clause 2. Commencement

This clause provides for the commencement of various Parts of the Bill at different times.

Subclause (1) provides that Part 1 of the Bill (containing these preliminary provisions) commences on the date that the Administrator’s assent to the Act is declared.

Subclause (2) provides that Part 2 (relating to measures to prevent a person obtaining the first home owner grant for acquiring an interest in a home that they already partly own and to ensure that a person is able to obtain only the stamp duty first home owner concession or principal place of residence rebate in relation to a home, but not both) commences on 2 May 2006.

Subclause (3) provides that the remainder of the Bill commences on 1 July 2006.

PART 2 – AMENDMENTS ABOUT FIRST HOME OWNER GRANTS AND CONCESSIONS AND PRINCIPAL PLACE OF RESIDENCE REBATES

Division 1 – First Home Owner Grant Act

Clause 3. Act amended

The Act being amended by this Division is the First Home Owner Grant Act.

Clause 4. Amendment of section 11 (Criterion 4 – Applicant (or applicant's spouse or de facto partner) must not have had relevant interest in residential property)

This clause rectifies a technical anomaly in section 11(3) of the First Home Owner Grant Act to prevent a person from being eligible for the grant where they purchase the remainder of the interests in a home that they live in and already partly own. It has always been a requirement of the Act that a person has not previously owned and resided in a home.

Similar amendments are made to sections 8B (see clause 5) and 8C (see clause 6) of the Stamp Duty Act in relation to the stamp duty first home owner concession and the stamp duty principal place of residence rebate.

This clause also specifies the “commencement date” (defined in section 13(5) of the First Home Owner Grant Act) as being the date at which it will be tested whether a person has or has not previously held a relevant interest in a home in which they have resided.

Division 2 – Stamp Duty Act

Clause 5. Act amended

The Act being amended by this Division is the Stamp Duty Act.

Clause 6. Amendment of section 8B (Concession for first home owners)

Subclause (1) inserts a new section 8B(2)(da) into the Stamp Duty Act that provides that a conveyee is not entitled to the first home owner concession if they already have a beneficial interest in the land the subject of the conveyance. This amendment makes it clear that a person cannot obtain the first home owner concession more than once for the same property.

Subclause (2) is an amendment solely to accommodate contemporary drafting style.

Subclause (3) is a consequential amendment arising from the insertion of new section 8B(2)(da) into the Stamp Duty Act by subclause (1).

Clause 7. Amendment of section 8C (Rebate for principal place of residence)

Subclause (1) inserts a new section 8C(2)(ba) into the Stamp Duty Act that fixes a technical anomaly to ensure that conveyees do not qualify for the stamp duty principal place of residence rebate where they purchase the remainder of the interests in a home that they already partly own. A corresponding amendment is also made to the First Home Owner Grant Act and to section 8B of the Stamp Duty Act relating to the stamp duty first home owner concession.

Subclause (2) is an amendment solely to accommodate contemporary drafting style.

Subclause (3) is a consequential amendment arising from the insertion of new section 8C(2)(ba) into the Stamp Duty Act by subclause (1).

PART 3 – FURTHER AMENDMENTS ABOUT FIRST HOME OWNER GRANTS AND CONCESSIONS AND PRINCIPAL PLACE OF RESIDENCE REBATES

Division 1 – First Home Owner Grant Act

Clause 8. Act amended

The Act being amended by this Division is the First Home Owner Grant Act.

Clause 9. Amendment of section 6 (Spouses and de facto partners)

Subclause (1) is a consequential amendment arising from subclause (2), which inserts a new subsection.

Subclause (2) inserts a new section 6(2) into the First Home Owner Grant Act that clarifies that the references to an applicant’s spouse or de facto partner in that Act means the person who was the applicant’s spouse or de facto partner at the “commencement date” of the relevant transaction.

Clause 10. Amendment of section 9 (Criterion 2 – Applicant to be Australian citizen or permanent resident)

This clause clarifies that an applicant for the first home owner grant is required to be an Australian citizen or permanent resident at the time of applying for the grant, rather than at the “commencement date”. This is consistent with the current approach for assessing an applicant’s Australian citizenship or residency status and acknowledges that a longer time frame may be necessary for a grant applicant’s citizenship or permanent residency application to be determined by the Australian Government. All other eligibility criteria for the grant will be assessed at the “commencement date” of an eligible transaction.

Clause 11. Amendment of section 11 (Criterion 4 – Applicant (or applicant's spouse or de facto partner) must not have had relevant interest in residential property)

This clause inserts a new section 11(5) of the First Home Owner Grant Act that provides that a person is taken not to have occupied a home as their residence where they applied for the grant but it was not paid because the Commissioner did not exempt them from the requirement to be at least 18 years of age.

This preserves the young person’s future entitlement to the first home owner grant where they were ineligible only because they were under 18 years of age. A similar amendment is also made to section 8B of the Stamp Duty Act.

Clause 12. Amendment of section 12 (Criterion 5 – Residence requirements)

This clause inserts a new section 12(1C) into the First Home Owner Grant Act that clarifies that the Commissioner is able to exercise his discretion to approve a longer period to occupy a home only where satisfied that there are special reasons to do so. This is consistent with the discretion to reduce the 6-month occupancy period and is how the current discretion is being administered.

The Commissioner of Taxes has released a Commissioner’s Guideline setting out the circumstances when these discretions will generally be exercised.

Clause 13. New section 40A

This clause inserts a new section 40A into the First Home Owner Grant Act that removes doubt that a person is not excused from answering questions or producing materials when required under an authorised investigation on the basis that it might incriminate them. This is consistent with the other Acts administered by the Commissioner of Taxes.

Additionally, the new section provides a safeguard in that the information is not admissible in a criminal proceeding other than a prosecution under the First Home Owner Grant Act or the Taxation (Administration) Act (as investigations in relation to the grant are usually conducted concurrently with investigations in relation to the stamp duty first home owner concession).

The information may also be used in an appeal under the First Home Owner Grant Act or Taxation (Administration) Act.

Clause 14. Amendment of section 41 (Power to recover amount paid in error etc.)

This clause amends section 41(3)(a) of the First Home Owner Grant Act to extend the time in which a person who is ineligible for the grant is required by the Commissioner to repay the grant from 14 days to 30 days. Additionally, for administrative certainty, the 30-day period is measured from the date of issue of the notice, rather than the date it is received (which may be difficult to ascertain).

Clause 15. Amendment of section 43 (Confidentiality)

Subclause (1) inserts a new section 43(3)(ea) into the First Home Owner Grant Act to allow the disclosure of information obtained under the First Home Owner Grant Act to certain Australian Government officers. This allows an exchange of relevant information between the Australian Government and the Territory for use in administering the First Home Owner Grant Act and the legislation administered by those Australian Government agencies.

Subclause (2) is an amendment solely to accommodate contemporary drafting style.

Division 2 – Stamp Duty Act

Clause 16. Act amended

The Act being amended by this Division is the Stamp Duty Act.

Clause 17. Amendment of section 8B (Concession for first home owners)

Subclause (1) inserts new definitions of “period for occupancy” and “relevant time” into section 8B(1) of the Stamp Duty Act.

The definition of “period for occupancy” is in relation to the 12-month and 6-month periods set out in section 8B, and simplifies the interpretation of that section.

The new definition of “relevant time” is specified to be the time when the instruments effecting or evidencing the conveyance of land the subject of an application for the stamp duty first home owner concession are executed. While this is a new definition, it reflects the current requirements of the legislation and has been adopted to simplify that legislation. The “relevant time” is to be used as the date for determining an applicant’s eligibility for the concession from 1 July 2006, except in relation to the applicant’s status as an Australian citizen or permanent resident, which is to be determined at the date of application for the concession.

Subclause (2) is a consequential amendment arising from subclause (18).

Subclauses (3), (4), (6) to (11) and (13) amend section 8B of the Stamp Duty Act to use the term “relevant time” (inserted by subclause (1)) so that, except in relation to an applicant’s status as an Australian citizen or permanent resident, the relevant date for determining eligibility for the concession is the time of execution of the relevant contract, and to clarify that references to the conveyee’s spouse or de facto partner are references to the conveyee’s spouse or de facto partner at the time of execution of that contract.

Subclause (5) amends section 8B(2) of the Stamp Duty Act to provide that an applicant for the stamp duty first home owner concession is required to be an Australian citizen or permanent resident on the date on which they submit their application for the first home owner concession. The reason that this criterion for the concession is not assessed at the “relevant time” is an acknowledgement that a longer time frame may be necessary to allow a concession applicant’s citizenship or permanent residency application to be determined by the Australian Government.

Subclause (12) is an amendment solely to accommodate contemporary drafting style.

Subclauses (14) and (16) are consequential amendments to use the new term “period for occupancy” inserted by subclause (1).

Subclause (15) is an amendment to accommodate contemporary drafting style and clarifies the operation of section 8B(4) of the Stamp Duty Act.

Subclause (17) inserts a new section 8B(11A) into the Stamp Duty Act that provides that a person is taken not to have had an interest in a home for the purposes of the stamp duty first home owner concession where they applied for, but where denied, the concession because the Commissioner did not exempt them from the requirement to be at least 18 years of age.

This preserves the young person’s future entitlement to the stamp duty first home owner concession where they were ineligible only because they were under 18 years of age. A similar amendment is also made to section 11 of the First Home Owner Grant Act.

Subclause (18) omits section 8B(12) of the Stamp Duty Act and inserts a new provision that clarifies that the Commissioner may only approve a longer period for occupying a home where satisfied that there are special reasons to do so. This is consistent with the discretion to reduce the 6-month occupancy period and is how the current discretion is being administered.

The Commissioner of Taxes has released a Commissioner’s Guideline setting out the circumstances when these discretions will generally be exercised.

Clause 18. Amendment of section 8C (Rebate for principal place of residence)

Subclauses (1), (2) and (4) are consequential amendments arising from subclause (5).

Subclause (3) is an amendment solely to accommodate contemporary drafting style.

Subclause (5) omits section 8C(10) of the Stamp Duty Act and inserts a new provision that clarifies that the Commissioner may only approve a longer period for occupying a home where satisfied that there are special reasons to do so. This is consistent with the discretion to reduce the 6-month occupancy period and is how the current discretion is being administered.

The Commissioner of Taxes has released a Commissioner’s Guideline setting out the circumstances when these discretions will generally be exercised.

PART 4 – AMENDMENTS ABOUT ABOLITION OF DUTY ON MARKETABLE SECURITIES

Division 1 – Taxation (Administration) Act

Clause 19. Act amended

The Act being amended by this Division is the Taxation (Administration) Act.

Clause 20. Amendment of section 4 (Interpretation)

Subclause (1) inserts a definition of “relevant acquisition” in section 4(1) of the Taxation (Administration) Act to ‘signpost’ the location of that definition in section 56P of the Taxation (Administration) Act.

Subclause (2) and (3) are consequential amendments arising from subclause (4).

Subclause (4) amends the definition of “trustee” in section 4(1) of the Taxation (Administration) Act by removing paragraph (f) of the definition as it is unnecessary with the abolition of duty on marketable securities.

Clause 21. Amendment of section 19 (Exemption: interposing new corporation between existing corporation and its shareholders)

This clause amends section 19 of the Taxation (Administration) Act to remove the corporate reconstruction exemption for conveyances of marketable securities, as it is unnecessary with the abolition of stamp duty on conveyances of marketable securities. However, the section retains the exemption for the purposes of the stamp duty land rich provisions in Part III, Division 8A for a transaction that is in conformity with the requirements of this section.

Clause 22. Amendment of section 20 (Exemption: conveyances and transfers between group corporations)

This clause omits section 20(1) of the Taxation (Administration) Act and replaces it with a new clause to remove the corporate reconstruction exemption for conveyances of marketable securities, as it is unnecessary with the abolition of stamp duty on conveyances of marketable securities. The exemption is retained for:
· conveyances of dutiable property;
· transfers of motor vehicle certificates of registration; and
· the purposes of the stamp duty land rich provisions in Part III, Division 8A for a conveyance of shares in a corporation or units in a unit trust scheme that is in conformity with the requirements of this provision.

Clause 23. Repeal of section 22

This clause repeals section 22 of the Taxation (Administration) Act, which previously provided the corporate reconstruction exemption for the purposes of the stamp duty land rich provisions in Part III, Division 8A. This is no longer required as a consequence of the amendments in clauses 21 and 22, which insert the exemption into sections 19 and 20 of the Taxation (Administration) Act.

Clause 24. Repeal of Part III, Division 11

This clause repeals Part III, Division 11 of the Taxation (Administration) Act in order to effect the abolition of duty on conveyances of marketable securities.

Clause 25. Amendment of section 83A (Application)

Subclause (1) omits section 83A(1A) of the Taxation (Administration) Act and replaces it with a new provision as a result of the abolition of stamp duty on marketable securities.

Subclauses (2) and (3) are amendments removing references to marketable securities as a result of the abolition of stamp duty on marketable securities.

Clause 26. Amendment of section 83B (Payment of duty on statements in absence of dutiable instrument)

Subclause (1) is a consequential amendment arising from subclause (2).

Subclause (2) removes section 83B(1)(b) of the Taxation (Administration) Act because of the abolition of stamp duty on conveyances of marketable securities.

Subclause (3) omits section 83B(3)(c)(i) of the Taxation (Administration) Act and replaces it with a new provision so that the section does not apply to a conveyance of marketable securities as a result of the abolition of stamp duty on conveyances of marketable securities.

Clause 27. Further amendments

This clause provides that Schedule 1 to this Bill effects certain minor amendments to the Taxation (Administration) Act, such as removing references to “marketable securities”, that are consequential to the abolition of stamp duty on marketable securities.

Division 2 – Taxation (Administration) Regulations

Clause 28. Regulations amended

The regulations being amended by this Division are the Taxation (Administration) Regulations.

Clause 29. Amendment of regulation 11 (Recognised financial markets)

Subclause (1) is a consequential amendment arising from the removal of regulation 11(2) of the Taxation (Administration) Regulations by subclause (2).

Subclause (2) omits regulation 11(2) of the Taxation (Administration) Regulations as it is no longer necessary with the removal of Part III, Division 11 of the Taxation (Administration) Act as part of the abolition of stamp duty on conveyances of marketable securities.

Division 3 – Stamp Duty Act

Clause 30. Act amended

The Act being amended by this Division is the Stamp Duty Act.

Clause 31. Amendment of section 8H (Meaning of "managed investment scheme conveyance")

Subclauses (1) to (6) make consequential amendments removing references to marketable securities in section 8H of the Stamp Duty Act as a consequence of the abolition of stamp duty on conveyances of marketable securities.

Clause 32. Amendment of Schedule 1

This clause omits item 20 of Schedule 1 to the Stamp Duty Act as part of the abolition of stamp duty on conveyances of marketable securities. Item 20 previously set out the rate of stamp duty imposed on conveyances of marketable securities.

Clause 33. Amendment of Schedule 2

This clause omits items 15, 16, 17, 19, 20, 21 and 22 of Schedule 2 to the Stamp Duty Act as part of the abolition of stamp duty on conveyances of marketable securities. These items previously set out exemptions to stamp duty on certain conveyances of marketable securities.

PART 5 – AMENDMENTS ABOUT LIABILITY TO DUTY FOR LEASES

Division 1 – Taxation (Administration) Act

Clause 34. Act amended

The Act being amended by this Division is the Taxation (Administration) Act.

Clause 35. Amendment of section 4 (Interpretation)

Subclause (1) removes the definitions of "franchise", "franchisor" and “rent” from section 4(1) of the Taxation (Administration) Act. These definitions are no longer necessary as a result of the abolition of duty on the grant of leases and franchise arrangements.

Subclause (2) inserts a new definition of “rent” into section 4(1) of the Taxation (Administration) Act that replicates part of the existing definition of “rent”. This definition is used in item 12 of Schedule 1 to the Stamp Duty Act after 1 July 2006 to calculate duty on leases where non-rent consideration is paid.

Clause 36. Amendment of section 4C (Duty assessable on certain franchise arrangements as if conveyance of dutiable property)

This clause amends section 4C of the Taxation (Administration) Act to remove the application of stamp duty at lease duty rates to franchise arrangements as a result of the abolition of duty on the grant of leases and franchise arrangements.

Clause 37. Amendment of section 9BA (Apportioning dutiable property in or related to Territory)

Subclause (1) is a consequential amendment arising from the removal of section 9BA(2) of the Taxation (Administration) Act by subclause (2).

Subclause (2) removes section 9BA(2) of the Taxation (Administration) Act, which previously set out the method for apportioning duty on the grant, renewal or extension of the term of a franchise arrangement. This is no longer necessary with the abolition of duty on rent paid for the grant of leases and franchise arrangements.

Clause 38. Amendment of section 9BB (Apportioning certain dutiable property where business in the Territory and elsewhere)

This clause is a consequential amendment arising from clause 37(1).

Clause 39. Repeal of sections 9BC, 53, 54, 55, 55AA and 56

This clause repeals sections 9BC, 53, 54, 55, 55AA and 56 of the Taxation (Administration) Act, which set out procedures for assessing or amending assessments of stamp duty on grants of leases and franchise arrangements. These provisions are no longer necessary with the abolition of duty on rent paid for the grant of leases and franchise arrangements from 1 July 2006.

Clause 40. Amendment of section 56B (Extension of time to apply for a refund)

This clause makes a consequential amendment to section 56B to remove the reference to section 56 of the Taxation (Administration) Act as a result of the repeal of section 56 of the Taxation (Administration) Act by clause 39.

Clause 41. New Part XI

This clause inserts a new Part XI in the Taxation (Administration) Act, dealing with transitional matters, comprising new Division 1 (containing new section 137) and new Division 2 (containing new sections 138, 139 and 140).

New section 137 of the Taxation (Administration) Act provides definitions for the new Part XI to more easily refer to the legislation in force prior to the amendments made by this Bill.

New section 138 of the Taxation (Administration) Act provides that after 1 July 2006, duty is still payable on the grant of a lease or franchise arrangement that was executed before 1 July 2006. This ensures all grants of leases executed prior to the abolition of duty on the grant of leases and franchise arrangements are treated in the same manner. Of note, while the new section only refers to “this Act”, that term is defined in section 4(1) to include the Taxation (Administration) Act and the Stamp Duty Act.

New section 139(1) of the Taxation (Administration) Act provides that section 139 applies only to a lease first executed before 1 July 2006, and that lease contains a provision for the payment of rent, at least part of which cannot be ascertained as a definite amount.

New section 139(2) of the Taxation (Administration) Act provides that section 55(7)(b) of the Taxation (Administration) Act as in force before 1 July 2006, dealing with adjusting the duty payable on a lease with unascertainable rent, applies only to the extent necessary to calculate a refund where the estimate of rent by the Commissioner of Taxes has caused a lessee to overpay duty. That is, after stamp duty on the rent paid for the grant or renewal of leases and franchises is abolished, a person will not need to resubmit a lease or franchise for ‘upstamping’ and pay further duty, but will be able to claim a refund for any overpaid duty.

New section 139(3) of the Taxation (Administration) Act provides that section 55(9) of the Taxation (Administration) Act, dealing with resubmitting leases for assessment does not apply except to facilitate refunds as provided for in new section 139(2).

New section 140 of the Taxation (Administration) Act provides that section 56 of the Taxation (Administration) Act (dealing with refunds of duty where a lease is determined early) does not apply unless the requirements in subsections (2)(a) and (b) are satisfied.

This prevents persons from attempting to avoid or reduce the amount of duty that they are required to pay on leases executed prior to 1 July 2006, by either determining or canceling the lease in order to obtain a refund or remission of duty, where the lessee or an “associate” of the lessee remains in occupation of the leased property.

New section 140(3) of the Taxation (Administration) Act defines an associate of a lessee for the purposes of new section 140(2)(ii) of the Taxation (Administration) Act as having the meaning in section 56A(7), as amended by clause 69.

New section 140(4) of the Taxation (Administration) Act provides that a reference to the leased property includes a reference to property substantially the same as the leased property.

Division 2 – Stamp Duty Act

Clause 42. Act amended

The Act being amended by this Division is the Stamp Duty Act.

Clause 43. Amendment of Schedule 1

Subclauses (1) to (9) amend item 12 of Schedule 1 to the Stamp Duty Act to effect the abolition of duty on the rent paid for the grant of leases and franchise arrangements. However, it also reflects that duty remains payable on leases that are assessed as conveyances of land, such as leases for nominal consideration or leases where valuable consideration other than rent is paid.

Where a valuable consideration other than rent is paid, that amount of consideration will be assessed for stamp duty as if there was a conveyance of the land the subject of the lease.

Where nominal rent is paid, or there is no consideration for the lease in money or money’s worth, the lease will be assessed as though it were a conveyance of the leasehold estate granted under the lease.

Division 3 – Land Title Act

Clause 44. Act amended

The Act being amended by this Division is the Land Title Act.

Clause 45. Amendment of section 66 (Requirements of instrument of lease)

This clause makes a minor consequential amendment to section 66(1)(c) of the Land Title Act as a result of the abolition of duty on rent paid for the grant and renewal of leases. The effect of this amendment will be to require instruments of lease to set out the amount of rent paid or payable as well as the amount of any other consideration that will be paid or payable. This amendment is necessary as non-rent consideration paid in relation to the grant of a lease will continue to be liable to stamp duty after 1 July 2006.

PART 6 – AMENDMENTS ABOUT LAND-HOLDING CORPORATIONS

Clause 46. Act amended

The Act being amended by this part is the Taxation (Administration) Act.

Clause 47. Amendment of section 4 (Interpretation)

This clause amends section 4(1) of the Taxation (Administration) Act by inserting a new definition of “associated person”. This definition is a ‘signpost’ provision that directs readers to section 4A, in which the term is fully defined. The definition that is proposed for “associated person” is derived from section 56C(2), which is to be repealed, as it no longer relates to the Division in which it is situated.

Clause 48. Amendment of section 4A (Unencumbered value – arrangements to affect stamp duty)

This clause amends section 4A of the Taxation (Administration) Act.

Subclauses (1) and (2) remove references to section 56C(2) from sections 4A(2) and (3), as that section is to be repealed, and replaces them with references to new sections 4A(4) and (5).

Subclause (3) removes a reference to section 56P from section 4A(3)(a).

Subclause (4) inserts a new:
· subsection (4) that defines who are associated persons in relation to a corporation;
· subsection (5) that defines when a person is a beneficiary of a trust for the purposes of new subsection (4); and
· subsection (6) that defines who is a relative of a natural person for the purposes of the new subsection (4).

Both of these new sections duplicate the effect of section 56C(2).

Clause 49. Repeal and substitution of Part III, Division 8A heading

This clause repeals the old heading of Part III, Division 8A of the Taxation (Administration) Act and replaces it with a new heading that more relevantly reflects that the Division deals with relevant acquisitions in land-holding corporations and unit trust schemes, rather than changes in control in those corporations and unit trust schemes.

Clause 50. Amendment of section 56C (Interpretation)

This clause omits definitions, inserts new definitions and amends existing definitions in section 56C(1) of the Taxation (Administration) Act.

Subclause (1) omits the definition of “interest” to enable a new definition of “interest” to be inserted by subclause (2).

Subclause (2) inserts new definitions of “beneficiary”, “change in control”, “declaration of trust over shares” and “statutory vesting” into section 56C(1) of the Taxation (Administration) Act. These definitions are inserted as a consequence of the abolition of stamp duty on conveyances of marketable securities, and are required to maintain the operation of paragraphs (cb), (cc), (cd) and (ce) of the definition of “acquire” in section 56C(1).

Subclause (2) also inserts definitions of “interest”, “land-holding corporation”, “linked entity” and “significant interest” that are ‘signpost' provisions to direct readers to the provisions in which those terms are fully defined.

Subclauses (3) to (5) update the drafting style used in the definition of “acquire” in section 56C(1) of the Taxation (Administration) Act.

Subclauses (6) to (8) amend paragraphs (cb), (cc), (cd) and (ce) of the definition of “acquire” in section 56C(1) of the Taxation (Administration) Act as a consequence of the abolition of stamp duty on conveyances of marketable securities. Without the amendments, these paragraphs of the definition would not operate properly.

Subclause (9) broadens the definition of “private unit trust scheme” in section 56C(1) of the Taxation (Administration) Act to align that concept broadly with the range of unit trusts that are subject to the corresponding stamp duty provisions in New South Wales and Victoria. As a consequence of this change, the land rich stamp duty provisions will apply to a broader range of unit trust schemes from 1 July 2006.

The amendments to the definition provide that a registered managed investment scheme will be a private unit trust scheme for the purpose of Part III, Division 8A where at least one of the following criteria are met:

· there are fewer than 300 members who are entitled to units under the scheme;
· a person, whether alone or together with related persons, is entitled to 20 per cent or more of the issued units in the scheme; or
· no units in the scheme have been offered to the public under a prospectus or product disclosure statement that has been lodged with the Australian Securities and Investments Commission.

Notably, section 56C(1A) continues to operate in determining the number of persons beneficially entitled to units in a unit trust scheme.

For unit trust schemes that were not a “private unit trust scheme” before 1 July 2006, but become one as a consequence of the changes to the definition of that term, section 56M(2)(c)(ii) of the Taxation (Administration) Act operates so that no duty will be payable on interests acquired in the trust scheme, when at the time the interest was acquired, the unit trust was not a private unit trust scheme.

Subclause (10) omits section 56C(2) of the Taxation (Administration) Act as that provision is no longer required in this Division. This is as a consequence of the Taxation (Administration) Amendment Act 2003. The effect of this provision has been retained in section 4A of the Taxation (Administration) Amendment Act, through the insertion of sections 4A(4) and (5), as section 4A formerly referred to section 56C(2).

Subclauses (11) and (12) are consequential amendments that arise from the abolition of stamp duty on conveyances of marketable securities. Without these amendments, paragraphs (cb), (cc) and (cd) of the definition of “acquire” in section 56C(1) of the Taxation (Administration) Act would not operate properly.

Subclause (13) is a consequential amendment arising from the repeal of section 56C(2) of the Taxation (Administration) Act.

Subclauses (14) to (18) are consequential amendments that arise from the abolition of stamp duty on conveyances of marketable securities. The new sections 56C(11A) and (11B) replicate the provisions in sections 56BA(4) and (5), relating to changes in trustees and beneficiaries of discretionary trusts.

Without these amendments, paragraphs (cb), (cc), (cd) and (ce) of the definition of “acquire” in section 56C(1) of the Taxation (Administration) Act would not operate properly.

Clause 51. New section 56CA

This clause is a consequential amendment that arises from the abolition of stamp duty on conveyances of marketable securities. It replicates provisions in section 56BAC of the Taxation (Administration) Act that will cease to apply to marketable securities from 1 July 2006. If this amendment was not made then paragraph (cd) of the definition of “acquire” in section 56C(1) of the Taxation (Administration) Act would not operate properly.

Clause 52. Amendment of section 56D (Lodgement of statements by trustees)

This clause is a consequential amendment which results from the insertion of the definition “land-holding corporation” into section 56C(1). It replaces the phrase “corporation to which this Division applies” with the defined term “land-holding corporation”.

Clause 53. Amendment of section 56F (Notice may be registered on title)

This clause amends section 56F of the Taxation (Administration) Act as a consequence of the replacement of the concept of “subsidiary” (which will cease to apply from 1 July 2006) with that of “linked entity” (which will apply from 1 July 2006) and as a consequence of the insertion of the definition “land-holding corporation” into section 56C(1). The concept of “linked entity” is defined in new section 56NA.

Clause 54. Amendment of section 56K (When statement to be lodged)

Subclause (1) is a consequential amendment which results from the insertion of the definition “land-holding corporation” into section 56C(1) of the Taxation (Administration) Act.

Subclause (2) omits section 56K(1A)(a) of the Taxation (Administration) Act and inserts a new provision which provides that a statement under section 56K(1) will not be required to be lodged in relation to a corporation whose shares, or unit trust scheme whose units, are quoted on a recognised financial market unless the quotation is a tax avoidance scheme, or part of a tax avoidance scheme.

This change has been made in response to an avoidance scheme that has operated elsewhere in Australia, whereby a corporation was briefly listed on the Bermuda Stock Exchange (a recognised financial market) for the purpose of avoiding stamp duty on a conveyance of marketable securities. While this scheme related to the avoidance of stamp duty in relation to the conveyance of marketable securities, it also would have been effective in avoiding the stamp duty land rich provisions.

Clause 55(2) makes a similar amendment to section 56M(2)(c)(i) of the Taxation (Administration) Act.

Subclause (3) amends section 56K(3) of the Taxation (Administration) Act to align the time within which a statement under section 56K is to be lodged with that applying to other dutiable instruments under section 9. The effect of this change is to require a statement under section 56K is to be lodged with the Commissioner of Taxes within 60 days of the occurrence of a relevant acquisition. A failure to lodge a statement within that time period is an offence under section 56K(6).

Clause 55. Amendment of section 56M (Statement chargeable with duty)

Subclause (1) is a consequential amendment to section 56M(2)(a) that recognises the abolition of stamp duty on marketable securities from 1 July 2006.

Subclause (2) amends section 56M(2)(c)(i) to provide that duty will only be deducted from a statement lodged under section 56K for an interest acquired in a corporation whose shares, or a unit trust scheme’s units, are quoted on a recognised financial market and that quotation was not a tax avoidance scheme, or part of a tax avoidance scheme. As with the amendment made by Clause 54(2), this change has been made in response to an avoidance scheme using the concession available to corporations whose shares are quoted on a recognised financial market.

Subclauses (3) to (5) are consequential amendments to section 56M of the Taxation (Administration) Act that arise from the abolition of stamp duty on conveyances of marketable securities. Without these amendments, section 56M(2) would not operate to deduct duty from a statement lodged under section 56K where the conditions set out in sections 56M(2)(c)(v), (vi) and (vii) are met.

Subclause (6) omits section 56M(2)(c)(viii) of the Taxation (Administration) Act, the operation of which is now dealt with by new section 56M(2A).

Subclause (6) also inserts a transitional provision into section 56M(2)(c) to ensure that stamp duty does not become payable for interests of less than 50 per cent acquired in a private unit trust scheme before 1 July 2006 because of the changes that take effect from that date to bring within the land rich provisions acquisitions of 20 per cent or more in private unit trust schemes.

For example, if a 30 per cent interest was acquired in a private unit trust scheme on 1 May 2006 and that trust holds land in the Territory with an unencumbered value of $1 million, that acquisition will not fall within the land rich provisions, as the interest acquired was less than 50 per cent (the rule that applies before 1 July 2006).

If, on 1 July 2006, a further 10 per cent interest was acquired in the unit trust, as a consequence of changes to sections 56P and 56Q of the Taxation (Administration) Act that take effect from 1 July 2006, that acquisition will now comprise a relevant acquisition, as an interest of 40 per cent is now held in the unit trust. However, as the person’s total interest in the scheme is less that 50 per cent, section 56M(2)(c)(viii) will operate so that duty payable in respect of the 30 per cent interest acquired on 1 May 2006 will be deducted from the duty that is otherwise payable on the whole 40 per cent interest.

If, on 1 December 2006, a further 20 per cent interest was acquired in the unit trust, an interest of 60 per cent would now be held in the unit trust. In this case, section 56M(2)(c)(viii) would cease to operate (as under the rules that applied prior to 1 July 2006, the acquisition of a 60 per cent interest was a relevant acquisition) and duty would be payable on the whole of that 60 per cent interest. However, a reduction in duty would be available under section 56M(2)(b) for the duty already paid on the 10 per cent interest acquired on 1 July 2006.

In summary, the acquisitions would be subject to duty in the following manner:

1 May 2006: No duty payable (not a relevant acquisition).

1 July 2006: Duty on 10 per cent interest (40 per cent interest less the 30 per cent acquired on 1 May 2006).

1 December 2006: Duty on 50 per cent interest (60 per cent interest less the 10 per cent interest acquired on 1 July 2006 in respect of which duty has already been paid).

Subclause (7) is a consequential amendment arising from amendments to sections 19 and 20 of the Taxation (Administration) Act and the repeal of section 22 of that Act (those sections relate to the corporate reconstruction exemption), which have occurred as a result of the abolition of stamp duty on conveyances of marketable securities.

Subclause (8) inserts a new section 56M(2A) that operates in a manner that is broadly consistent with the current section 56M(2)(c)(viii), which is to be omitted by clause 55(6). New section 56M(2A) modifies the operation of the current provision embodied in section 56M(2)(c)(viii) by providing a proportionate reduction in duty in relation to that part of the land to which a corporation is entitled that could have been directly conveyed from the person who held the interest to the person who acquired the interest and would have been exempt from duty. Of note, this provision does not consider whether a direct conveyance of land could have been exempt, but whether it would in fact be exempt.

For example, A is a trustee of the A trust. A, as trustee of the A trust, holds a 40 per cent interest in corporation Z, which is a land-holding corporation. Corporation Z is entitled to land with an unencumbered value of $1 million. A also holds a further 20 per cent interest in corporation Z in a non-trustee capacity (that is, A holds a total interest of 60 per cent in corporation Z).

B is appointed as a replacement trustee of the A trust on the retirement of A from that role. All of the shares held by A in corporation Z are transferred from A to B. Section 56M(2A) operates so that no duty will be payable on that part of an interest that could have been conveyed (as land) directly from A to B (that is, if a corresponding proportion of corporation Z’s land were transferred from A to B, rather than shares) in circumstances where that conveyance would not have been liable to ad valorem duty under Schedule 1, item 5 to the Stamp Duty Act.

In the present example, if there had been a conveyance of land then Schedule 2, item 9A(a) to the Stamp Duty Act would, subject to the conditions in that provision being met, have provided an exemption from stamp duty for the interest in the land that A held as trustee for the A trust. However, duty would still have been payable in relation to the interest in the land that person A did not hold as a trustee of the A trust.

Accordingly, duty would not be payable on the 40 per cent interest in corporation Z acquired by B from A as a trustee, but duty would have been payable on the 20 per cent interest acquired by B what A held in their own right. That is, subject to section 56M(2A), duty would be assessed under section 56M(1) on the whole of the 60 per cent interest acquired by B in corporation Z (that is, duty would be assessed on an unencumbered value of $600 000, which is $32 400).

Section 56M(2A) would operate to deduct the amount of duty that would have been payable on that proportion of the dutiable value of the interest that B has acquired from A that would have been exempt if there had been a direct transfer of land from A to B (that is, duty on the 40 per cent interest in corporation Z that A held as trustee of the A trust. The unencumbered value of this interest is $400 000, and so the duty to be deducted is $18 800).

Consequently, the duty payable by B for the acquisition of A’s interest in corporation Z would be $13 600 (that is, $32 400 minus $18 800).

New section 56M(2A) also recognises that no duty should be payable in respect of certain transactions arising from proceedings under the Family Law Act of the Commonwealth, where the only parties to the transaction are or were married, and the person receiving the interest is not acting as agent or trustee for another person.

Subclause (8) also inserts new section 56M(2B) into the Taxation (Administration) Act, which prevents an amount being deducted twice in relation to the one interest, once under section 56M(2)(c) and then again under section 56M(2A).

For example, if A acquires a 60 per cent interest in a corporation whose shares are quoted on a recognised financial market, and that acquisition occurred as a result of a change in trustees of a trust, duty in respect of that interest is to be deducted from a statement lodged under section 56K only once under section 56M(2)(c)(i) (as the corporation’s shares are quoted on a recognised financial market) and not also under section 56M(2A) (as a consequence of the exemption in Schedule 2, item 9A(a) to the Stamp Duty Act, which applies to certain conveyances on the retirement or addition of a trustee to a trust).

Subclause (9) amends section 56M(3) of the Taxation (Administration) Act to provide that duty payable on a statement lodged under section 56K is to be paid within 60 days of the relevant acquisition to which it relates. This change aligns the time within which duty is required to be paid under Division 8A with that applying to conveyances of dutiable property generally.

Clause 56. Repeal and substitution of section 56N

This clause replaces the existing section 56N of the Taxation (Administration) Act to update that provision’s drafting style and to reflect the repeal of a number of the subsections in that section. The existing section 56N(5), which related to subsidiaries, is repealed altogether, as that concept has been replaced by that of “linked entities”, which is set out in new section 56NA. The linked entities concept reflects the approach adopted by New South Wales and Victoria. Further, references to co-ownership of land have been removed, and are now set out in new section 56NB, which determines the unencumbered value of land to which a corporation is entitled.

The clause also inserts a new section 56NA into the Taxation (Administration) Act, which defines the new term “linked entity”.

New section 56NA(2)(a) is intended to apply to determine a person’s (person A’s) entitlement to the property of another person (person B), where person B is a corporation. In order to do this, section 56NA(2)(a) requires the calculation of person A’s entitlement to person B’s property on a winding up of person B. This entitlement is to be calculated in accordance with section 56C(6), which makes certain assumptions about person A’s entitlement to person B’s property, and to how the winding up is to occur.

New section 56NA(2)(b) is intended to apply to determine a person’s (person C’s) entitlement, whether vested or contingent or otherwise, to the property of another person (person D), where person D is a trustee of a trust. In order to do this, section 56NA(2)(b) requires the calculation of person C’s entitlement to person D’s property on a distribution of the trust for which person D acts as trustee. This entitlement is to be calculated in accordance with section 56C(7), which makes certain assumptions about person C’s entitlement to the property of the trust. Of note, this provision is intended to apply whether person C has a vested share or is contingently entitled under the trust, or if the trust is a discretionary trust, may benefit from it.

The following examples help to illustrate the concepts contained in new section 56NA.

Example 1

If A, whether alone, or together with another linked entity, is entitled to receive at least 20 per cent of B’s property, then B is a linked entity of A. Also, where B is a linked entity of A and C is also a linked entity of A, then B and C are also linked entities of each other.

Example 2.

This preservation of the law as it applied before 1 July 2006 for interests acquired after 1 July 2006 will not apply, however, where the shares or units of the land-holding corporation or unit trust scheme have been quoted on a recognised financial market and that quotation is a tax avoidance scheme or part of a tax avoidance scheme.

PART 7 – MISCELLANEOUS AMENDMENTS ABOUT DUTIABLE PROPERTY, ASSESSMENTS AND RECOVERY OF DUTY AND PENALTIES

Division 1 – Taxation (Administration) Act

Clause 64. Act amended

The Act being amended by this Division is the Taxation (Administration) Act.

Clause 65. Amendment of section 4 (Interpretation)

Subclause (1) adds a new definition of “surrender of dutiable property” into section 4(1) of the Taxation (Administration) Act. This definition is a ‘signpost’ provision that directs readers to section 4D, in which the term is fully defined.

Subclauses (2) and (3) make consequential amendments to the definitions of “conveyance” and “dutiable property” as a result of the addition of the definition of “surrender of dutiable property”. These changes are intended to ensure that a “conveyance” will include a “surrender of dutiable property” as defined in new section 4D of the Taxation (Administration) Act.

Clause 66. New section 4AB

This clause inserts a new section 4AB into the Taxation (Administration) Act. This section codifies the Commissioner of Taxes’ current practice by providing that in valuing a part interest in property, the correct approach is to determine the unencumbered value of the whole property, and then apportion that value according to the interest that is being conveyed.

For example, a parcel of land has an unencumbered value of $1 million, and is held by persons A and B as tenants in common in equal shares. If person A was to convey their interest in the parcel to person B, the unencumbered value of person A’s interest in the land would be $500 000 (that is, half of $1 million).

Clause 67. New section 4D

This clause inserts a new section 4D into the Taxation (Administration) Act that is modeled on a number of provisions in the Queensland Duties Act. This section has been added as a consequence of the Supreme Court of Queensland decision in the case of McDonald’s Australia Holdings Ltd & Anor v Commissioner of State Revenue [2004] QSC 357 (the “McDonald’s case”).

The Court determined in that case that the extinguishment or cancellation of a person’s interest in dutiable property did not necessarily mean that the property was conveyed or transferred to another person (that is, there was no “surrender” of the property as such) even where that other person gained all the benefits of having received the property.

Prior to that decision, it was understood that stamp duty applied to any surrender of dutiable property, as if it were a conveyance of that property. Therefore, this amendment seeks to clarify the position in relation to surrenders of dutiable property.

New subsection 4D(1) clarifies that the word “surrender” in relation to dutiable property, includes surrendering the property by any of the methods set out in paragraphs (a) to (g) such as cancellation, extinguishment or similar actions. As the definition of “conveyance” has been amended to clarify that it includes a “surrender”, it also includes all of these transactions.

New subsection 4D(2) operates where dutiable property is surrendered by a person, but the property does not vest in or accrue to another person. An example of this was seen in the McDonald’s case, where the franchisee’s rights in dutiable property were said to be extinguished, but that the dutiable property was not transferred to the franchisor as a result of that extinguishment because the franchisor already had those rights (despite the franchisor having limited ability to exercise those rights because of the franchise agreement).

Accordingly, new subsection 4D(2) provides that where there is a surrender of dutiable property and it does not vest in or accrue to another person, but it has the same effect as if the dutiable property was conveyed to another person, then it is taken to be a conveyance of the dutiable property for the purposes of assessing stamp duty.

New subsection 4D(3) operates where there is a deemed conveyance under new subsection 4D(2), and sets out which property is taken to be conveyed, who is taken to be the conveyee and when the conveyance is deemed to occur.

New subsection 4D(4) provides that the time for determining the unencumbered value of dutiable property that is surrendered is immediately before the property is surrendered.

New subsection 4D(5) provides two situations where a surrender has the same effect as a conveyance of dutiable property and accordingly, new subsection 4D(2) will operate to deem a conveyance of the dutiable property.

An example is where a person surrenders their rights to dutiable property under a franchise arrangement. The franchisor, who was previously restricted from using that dutiable property or from operating in the franchisee’s territory (for example, a specific restaurant site), may now use that dutiable property and operate in that territory.

Similarly, rather than using that dutiable property or operating in that territory, the franchisor could grant a new franchise over that territory, or part of that territory, which it could not previously do while the franchise agreement was in place.

In either case, this has the same effect as a conveyance of the franchisee’s dutiable property to the franchisor, because it has the same effect as increasing the dutiable property held by the franchisor by the amount of dutiable property held by the franchisee.

Clause 68. Amendment of section 10 (Evasion of duty)

This clause removes the court’s ability to impose on a person who is found guilty of evasion an additional penalty of up to double the amount of duty or tax evaded. The court’s ability to impose this additional penalty is no longer required as a consequence of clause 76, which omits section 108(2) of the Taxation (Administration) Act. Section 108(2) prevented the Commissioner of Taxes from recovering penalties imposed on a person under the Taxation (Administration) Act where a person is also prosecuted under that Act.

Clause 69. Amendment of section 56A (Refund or remission of duty if transaction does not proceed etc.)

This clause amends section 56A of the Taxation (Administration) Act by inserting new subsections (1A), (5) and (6).

Section 56A currently provides for the refund or remission of stamp duty where a transaction does not proceed to completion. However, a refund or remission of duty is not available where there has been a sub-sale or conveyance by direction of the property that was the subject of the refund or remission application.

New subsection (1A) provides that a refund is not available where the lessee or an “associate” of a lessee remains in occupation of leased premises after the date when the lease does not proceed. This prevents people avoiding duty by not proceeding with leases until after 1 July 2006.

New subsection (5) ensures that an instrument remains liable for stamp duty even after stamp duty has previously been refunded or remitted on that instrument, if the Commissioner of Taxes believes that a sub-sale or conveyance by direction of the property covered by the instrument has occurred.

New subsection (6) allows the Commissioner of Taxes to reassess such an instrument at any time, irrespective of the limitation usually placed on reassessments of stamp duty. This recognises that stamp duty has been avoided in these circumstances and that no limitation should exist in recouping the duty that is properly payable.

New subsection (7) defines who is an associate of a lessee for the purposes of the anti-avoidance provision in new subsection (1A).

Clause 70. Amendment of section 83A (Application)

This clause makes consequential amendments to section 83A of the Taxation (Administration) Act that arise from the new definition of “surrender of dutiable property” being inserted into the Taxation (Administration) Act.

Subclauses (1) and (3) are consequential amendments arising from subclause (2) inserting new section 83A(1B)(e) of the Taxation (Administration) Act.

Subclause (2) inserts new section 83A(1B)(e) of the Taxation (Administration) Act, which ensures that a surrender of dutiable property is taken to cause or result in a change in beneficial ownership of such property, that that this is taken to have occurred at the time of the surrender. This provision ensures that a statement will be created under section 83B of the Taxation (Administration) Act that will be liable to stamp duty, where a surrender of dutiable property is not evidenced in writing.

Subclauses (4), (5) and (7) are amendments solely to accommodate contemporary drafting style.

Subclause (6) omits current section 83A(2)(e), which provided that a surrender of a lease does not cause or result in a change in beneficial ownership of dutiable property. The effect of this omission is to ensure that where consideration is provided for the surrender of a lease of land, a stamp duty liability will not be dependent on whether a written instrument is executed. Where no consideration is provided for the surrender of a lease of land, the stamp duty liability will be based on the unencumbered value of the dutiable property surrendered. However, the commercial reality of most such surrenders is that the value of the leasehold estate will either be nil or minimal. Accordingly, there will usually either be no or nominal stamp duty consequences.

Clause 71. Amendment of section 87 (Failure to comply with requirements for further information etc.)

This clause removes the court’s ability to impose, on a person found guilty of providing false or misleading information to Commissioner, an additional penalty of up to double the amount of duty or tax that would have been avoided if this false or misleading information were relied upon. The court’s ability to impose this additional penalty is no longer required as a consequence of clause 76, which will enables the Commissioner of Taxes to impose and recover penalties from a person that is prosecuted for this offence.

Clause 72. Amendment of section 88 (False or misleading returns)

This clause removes the court’s ability to impose, on a person found guilty of providing a false or misleading return to Commissioner, an additional penalty of up to double the amount of tax that would have been avoided if the return had been accepted as correct. The court’s ability to impose this additional penalty is also no longer required as a consequence of clause 76.

Clause 73. Amendment of section 89 (False or misleading declarations)

This clause also removes the court’s ability to impose, on a person found guilty of providing false or misleading information to Commissioner, an additional penalty of up to double the amount of duty or tax that would have been avoided if the information were relied upon. The court’s ability to impose this additional penalty is no longer required as a consequence of clause 76.

Clause 74. Repeal of section 91

This clause repeals section 91 of the Taxation (Administration) Act. Section 91 is no longer required as a result of sections 87(6) and 88(3) being omitted by clauses 71 and 72.

Clause 75. Amendment of section 97 (Amended assessments generally)

This is a consequential amendment arising from the amendments to the Stamp Duty Act in relation to the first home owner concession and principal place of residence rebate. This amendment directs the Commissioner to reassess the duty payable on a conveyance where a person is or becomes eligible for the concession or rebate within the 3 year reassessment period.

For example, a person may become an Australian citizen or permanent resident and qualify for the first home owner concession where they previously only received the principal place of residence rebate. In this instance, the person would be entitled to a refund of the difference between the concession and the rebate as it applied at the time of the conveyance.

Clause 76. Amendment of section 108 (Recovery of additional penalty)

Subclause (1) is a consequential amendment arising from subclause (2).

Subclause (2) omits section 108(2) of the Taxation (Administration) Act. That provision prevented the Commissioner of Taxes from recovering penalties imposed on a person under the Taxation (Administration) Act where a person is also prosecuted under that Act.

This change will ensure that serious breaches of the stamp duties laws, such as where a person deliberately provides false or misleading information to the Commissioner in an attempt to evade tax, will not receive a penalty that is less than those imposed by the Commissioner for less serious matters that do not warrant prosecution. Of note, the court’s ability to impose penalties under sections 10, 87, 88 and 89 of the Taxation (Administration) Act have been amended as a consequence of this change, reducing the maximum amount of penalty that courts can impose for certain offences.

Clause 77. New section 142 and 143

This clause inserts a new section 142 and 143.

New section 142 provides as a transitional matter that stamp duty is still imposed on a conveyance of marketable securities that occurs, is executed, or is taken to have occurred prior to 1 July 2006 as if stamp duty on the conveyance of marketable securities was not abolished.

New section 143 ensures that with the omission of section 108(2) of the Taxation (Administration) Act, the Commissioner can now commence both prosecutions for offences and recover penalties, in relation to assessments issued before 1 July 2006.

This approach recognises that offences may have been committed prior to 1 July 2006, but were not discovered until after that date, or that a prosecution for an offence committed prior to 1 July 2006 may not commence until after that date.

The new provisions will not apply to prosecutions formally commenced prior to 1 July 2006.

Division 2 – Stamp Duty Act

Clause 78. Act amended

The Act being amended by this Division is the Stamp Duty Act.

Clause 79. Amendment of Schedule 2

This clause inserts a new stamp duty exemption for a new motor vehicle certificate of registration that has been completed solely to correct an error on the issue or transfer of another mother vehicle certificate of registration. This is consistent with the stamp duty treatment of other instruments that are executed solely to correct an error contained in an earlier instrument on which full stamp duty has been paid. Prior to the introduction of this provision the practice was for the Treasurer to approve a wavier or ex gratia payment of the duty under the Financial Management Act.

PART 8 – AMENDMENTS ABOUT ABOLITION OF ADHESIVE STAMPS

Division 1 – Taxation (Administration) Act

Clause 80. Act amended

The Act being amended by this Division is the Taxation (Administration) Act.

Clause 81. Amendment of section 4 (Interpretation)

Subclause (1) is a consequential amendment arising from the repeal of section 14 of the Taxation (Administration) Act. Section 14 of the Taxation (Administration) Act, dealing with the use of adhesive duty stamps, is repealed as adhesive duty stamps can not be used to pay a stamp duty liability after 1 July 2006.

Subclause (2) is a consequential amendment arising from the repeal of section 14 of the Taxation (Administration) Act. This clause inserts a new definition of “cancellation” into section 4(1) of the Taxation (Administration) Act, which replicates the content of section 14(1).

Subclause (3) is a consequential amendment arising from an amendment to section 8(1) of the Taxation (Administration) Act.

Subclauses (4) and (5) are consequential amendments to what is the duly stamping of an instrument, recognising that duty stamps cannot be used to stamp an instrument from 1 July 2006.

Clause 82. Amendment of section 8 (Duty stamps)

This clause amends section 8(1) of the Taxation (Administration) Act by removing the Commissioner’s ability to make and sell adhesive duty stamps.

Clause 83. Amendment of section 9 (When instruments lodged and duty payable)

This clause is another consequential amendment arising from the repeal of section 14 of the Taxation (Administration) Act to remove references to the use of duty stamps.

Clause 84. Amendment of section 11 (Duty or tax denoted by impressed stamp)

This clause omits and replaces section 11(1) of the Taxation (Administration) Act to remove the option of using adhesive duty stamps to pay a stamp duty liability.

Clause 85. Amendment of section 12 (Fraudulent actions relating to stamps)

Subclause (1) inserts a new section 12(1)(aa) of the Taxation (Administration) Act that provides a new offence relating to adhesive duty stamps. This offence replicates an existing offence that was set out in section 14(3) of the Taxation (Administration) Act, which is repealed from 1 July 2006.

Subclause (2) makes amendments that are solely to accommodate contemporary drafting style.

Clause 86. Repeal and substitution of section 13

This clause repeals section 13 of the Taxation (Administration) Act, which relates to refunds for spoilt adhesive duty stamps and stamps affixed in error, and inserts a new section 13 into the Taxation (Administration) Act. This new section provides for refunds for unused stamps as well as spoilt adhesive duty stamps and stamps affixed in error. These stamps can then be destroyed. New section 13 also provides that an application for a refund of the amount paid for an adhesive duty stamp must be made before 1 July 2007 and must be accompanied by the stamps for which a refund is being sought.

Clause 87. Repeal of section 14

This clause repeals section 14 of the Taxation (Administration) Act, which set out how an adhesive duty stamp was to be cancelled and affixed to an instrument. The new definition of “cancellation” which is inserted into section 4(1) of the Taxation (Administration) Act now sets out these rules. Further, the offence provided in section 14(3) of the Taxation (Administration) Act has been moved to section 12(1) of the Taxation (Administration) Act.

Division 2 – Stamp Duty Act

Clause 88. Act amended

The Act being amended by this Division is the Stamp Duty Act.

Clause 89. Amendment of section 8 (Waiver of payment of small amounts)

This clause amends section 8(2) as a consequence of the amendments to the Taxation (Administration) Act which prevent adhesive duty stamps from being used to pay a stamp duty liability.

PART 9 – AMENDMENTS ABOUT OBJECTIONS, APPEALS AND
OTHER PROCEEDINGS

Division 1 – First Home Owner Grant Act

Clause 90. Act amended

The Act being amended by this Division is the First Home Owner Grant Act.

Clause 91. Amendment of section 24 (Objections)

This clause amends section 24 of the First Home Owner Grant Act by changing the period in which an objection can be made under the First Home Owner Grant Act from 30 days after the date of the notice of the Commissioner of Taxes’ decision in relation to an application to 60 days.

As the first home owner grant and the stamp duty first home owner concession have very similar eligibility requirements, a dissatisfied applicant will usually object to both matters. This amendment aligns the objection timeframes for the grant and the concession.

Clause 92. Repeal and substitution of sections 26 and 27

This clause repeals sections 26 and 27 of the First Home Owner Grant Act, which relate to a grant applicant’s right to appeal from an objection decision to the Local Court, and inserts a new section 26 into the First Home Owner Grant Act. New section 26 provides a grant applicant with a right of appeal to the Taxation and Royalty Appeals Tribunal established by section 105T(1) of the Taxation (Administration) Act.

New section 26 also provides that the appeal is an appeal de novo. This means that the Tribunal will ‘stand in the shoes’ of the Commissioner to determine what it believes to be the correct decision on an objection.

This amendment will mean that appeals in relation to the first home owner grant and the stamp duty first home owner concession will be broadly consistent.

Clause 93. New Part 5

This clause inserts a new Part 5, containing a new section 51, into the First Home Owner Grant Act that provides transitional matters in relation to objections and appeals under that Act.

New section 51 provides that the new provisions only apply in relation to decisions on or after 1 July 2006. For decisions prior to that date, the old objection and appeal procedures apply.

Division 2 – Taxation (Administration) Act

Clause 94. Act amended

The Act being amended by this Division is the Taxation (Administration) Act.

Clause 95. Amendment of section 100 (Definitions)

Subclause (1) is a consequential amendment arising from subclause (2).

Subclause (2) inserts new definitions for “decision”, “decision maker”, “first home owner grant decision” and “objector” into section 100 of the Taxation (Administration) Act to facilitate first home owner grant applicants appealing objection decisions to the Tribunal rather than the Local Court.

Clause 96. Amendment of section 105B (How to commence an appeal)

This clause inserts new section 105B(3) into the Taxation (Administration) Act, which allows an applicant for the first home owner grant to lodge an appeal with the Tribunal within 60 days after the date of the notice advising them of the outcome of their objection . This is an increase from the 28 days in which an appeal previously had to be commenced with the Local Court.

Clause 97. Amendment of section 105C(2) (Notice of appeal)

This clause makes a consequential amendment to section 105C(2) of the Taxation (Administration) Act as a result of first home owner grant applicants being allowed to appeal to the Tribunal.

Clause 98. Amendment of section 105D (Appeal commenced out of time)

This clause makes a consequential amendment to section 105D of the Taxation (Administration) Act as a result of first home owner grant applicants being allowed to appeal to the Tribunal.

Clause 99. Amendment of section 105E (Response of decision maker to notice of appeal)

This clause makes a consequential amendment to section 105E of the Taxation (Administration) Act as a result of first home owner grant applicants being allowed to appeal to the Tribunal.

Clause 100. Amendment of section 105G (Appeal to Supreme Court on question of law)

This clause makes consequential changes to section 105G of the Taxation (Administration) Act as a result of first home owner grant applicants being allowed to appeal to the Tribunal.

Clause 101. Amendment of section 105H (Referral to Supreme Court)

This clause makes consequential changes to section 105H of the Taxation (Administration) Act as a result of first home owner grant applicants being allowed to appeal to the Tribunal. The effect of the provision is to treat a first home owner grant applicant as if they are an appellant in relation to a taxation decision so that the Tribunal can refer the matter to the Supreme Court.

Clause 102. Amendment of section 105S (Certain decisions final)

This clause makes consequential changes to section 105S of the Taxation (Administration) Act that arise from the abolition of stamp duty on the conveyance of marketable securities. Without these changes, section 105S would cease to operate properly.

Clause 103. Amendment of section 105T (Establishment and jurisdiction)

This clause is a consequential change as a result of first home owner grant applicants being allowed to appeal to the Tribunal. It ensures that the Tribunal has jurisdiction to determine appeals under the First Home Owner Grant Act.

Clause 104. New Part VII heading

This clause inserts a new Part heading after section 111 of the Taxation (Administration) Act. This is necessary because the operation of section 112 of the Taxation (Administration) Act will not be limited to proceedings for the recovery of duty or tax. The old heading is repealed by clause 106.

Clause 105. Amendment of section 112 (Evidence in proceeding)

This clause amends section 112(1) of the Taxation (Administration) Act to remove doubt that stamp duty assessments are not susceptible to court challenges where the legislated objection and appeal process is available. Generally this will prevent taxpayers bypassing the legislated objection and appeal process or simultaneously lodging an objection and applying to a court for judicial review of an assessment. This amendment complements section 99 of the Taxation (Administration) Act, which provides for the validity of an assessment.

Clause 106. Repeal of Part VII heading

This clause omits a Part Heading after section 112 of the Taxation (Administration) Act, and is a consequential amendment arising from clause 104.

Division 3 – Taxation and Royalty Appeals Tribunal Rules

Clause 107. Rules amended

The Rules being amended by this Division are the Taxation and Royalty Appeals Tribunal Rules.

Clause 108. Amendment of rule 2 (Definitions)

This clause makes consequential amendments to rule 2 of the Taxation and Royalty Appeals Tribunal Rules which arise from first home owner grant applicants being given the right to appeal to the Tribunal.

Clause 109. Amendment of Schedule 1

Subclauses (1) and (2) are consequential amendments to Form 1 under the Taxation and Royalty Appeals Tribunal Rules which arise from first home owner grant applicants being given the right to appeal to the Tribunal.

PART 10 – AMENDMENT OF PAY-ROLL TAX ACT

Clause 110. Act amended

The Act being amended by this Division is the Pay-roll Tax Act.

Clause 111. Amendment of section 3 (Interpretation)

Subclause (1) amends the definition of “wages” in section 3(1) of the Pay-roll Tax Act by inserting new paragraph (baa). This new provision ensures that payments to a director or a member of the governing body of that company are wages for the purposes of the Pay-roll Tax Act whether paid by the company or by someone on behalf of the company. Direct payments to directors are already subject to payroll tax and this change ameliorates any avoidance opportunities.

Subclause (2) are amendments solely to accommodate contemporary drafting style.

Subclause (3) provides that where “wages” have been paid under new paragraph (baa), they are taken to have been paid by the company of which that person is a director or member of the governing body. This means that the company is taken to be the employer liable to payroll tax on those wages.

Clause 112. Amendment of section 8 (General exemption)

This clause amends section 8(1) of the Pay-roll Tax Act to increase the “prescribed amount” for a return period of one month from $83 333.33 to $104 166.66. This increases the payroll tax annual threshold to $1.25 million.

Clause 113. Amendment of section 10A (Annual adjustments)

This clause amends the definition of “prescribed amount” in section 10A(1) of the Pay-roll Tax Act to increase the payroll tax annual threshold to $1.25 million.

Clause 114. Amendment of section 11 (Adjustment if employer ceases to pay taxable wages or joins group)

This clause amends the definition of “prescribed amount” in section 11(1) of the Pay-roll Tax Act to increase the payroll tax annual threshold to $1.25 million.

Clause 115. Amendment of section 12 (Registration)

This clause amends section 12 of the Pay-roll Tax Act to increase the amount of weekly wages that an employer can pay before being required to register from $19 230 to $24 030. This is as a result of the increase in the payroll tax annual threshold to $1.25 million.

Clause 116. Amendment of section 17K (Annual adjustments)

This clause amends the definition of “prescribed amount” in section 17K(2) of the Pay-roll Tax Act to increase the payroll tax annual threshold to $1.25 million.

Clause 117. Amendment of section 17L (Adjustment if group member ceases to pay taxable wages or interstate wages)

This clause amends the definition of “prescribed amount” in section 17L(2) of the Pay-roll Tax Act to increase the payroll tax annual threshold to $1.25 million.

Clause 118. Amendment of section 33 (Evidence)

This clause omits section 33(1) of the Pay-roll Tax Act and replaces it with a new provision to clarify that decisions, determinations and assessments of the Commissioner of Taxes are to be challenged only by way of the objection and appeal provisions set out in the Taxation (Administration) Act.

Clause 119. New section 34

This clause inserts a new section 34 into the Pay-roll Tax Act to provide that decisions, determinations or assessments are not affected merely because a provision of the Pay-roll Tax Act has not been complied with.

This clause is a consequential amendment that supports new section 33(1).

PART 11 – AMENDMENT OF MINERAL ROYALTY ACT

Clause 120. Act amended

The Act being amended by this Part is the Mineral Royalty Act.

Clause 121. Amendment of section 4 (Definitions)

This clause amends the definition of “Secretary” in section 4 of the Mineral Royalty Act. This definition is now a ‘signpost’ provision and refers the reader to new section 49AA of the Mineral Royalty Act. The former definition provided that the “Secretary” was the Chief Executive Officer of the Agency allotted responsibility for the Mineral Royalty Act.

Clause 122. New section 49AA

This clause inserts new section 49AA into the Mineral Royalty Act, which provides a definition of “Secretary”, the powers of that position, and will allow for certain persons to act in that role.

The effect of the new definition will be that the statutory position of “Secretary” can be aligned with that of the person who holds the role of Commissioner of Taxes under the Taxation (Administration) Act. The need for this change has arisen to allow a reassignment of the responsibility for the position of mineral royalty Secretary within Northern Territory Treasury, and is expected to provide for the more efficient administration of mineral royalties.

Clause 123. New Part VII

This clause inserts a new Part VII into the Mineral Royalty Act which contains new section 53. This section provides that the Chief Executive Officer of the agency allotted responsibility for the Mineral Royalty Act will continue to act as the Secretary under that Act until the Minister appoints a person to that role. This provision ensures that there is no vacancy in the position of Secretary on the commencement of this Bill.

Schedule

This Schedule makes a number of minor amendments to the Taxation (Administration) Act that are consequential to the abolition of stamp duty on conveyances of marketable securities. These changes include removing references to “marketable securities” and correcting references to section numbers that have changed as a consequence of implementing the abolition of stamp duty on marketable securities.

Alteration to Section Heading

This provision of the Bill amends the heading to section 23 of the Taxation (Administration) Act as a consequence of abolishing section 22 of that Act due to the abolition of stamp duty on conveyances of marketable securities. The provision also notes that in addition to this change, other clauses of the Bill may alter other section headings of within the Taxation (Administration) Act.

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