Northern Territory Second Reading Speeches

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PAY-ROLL TAX AMENDMENT (HARMONISATION) BILL 2008

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

Serial 146 and 148
Ms Lawrie


REVENUE LAW REFORM (BUDGET INITIATIVES) BILL 2008
PAY-ROLL TAX AMENDMENT (HARMONISATION) BILL 2008
SECOND READING SPEECH

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

The Bills put in place a package of revenue measures announced as part of the 2008-09 Budget and implement payroll tax harmonisation measures first announced in March 2007. The Bills propose amendments to the:
· Stamp Duty Act;
· Taxation Administration Act;
· First Home Owner Grant Act; and
· Pay-roll Tax Act.

The key proposals involve easing the tax and compliance cost burden on Territorians and Territory businesses by:
· reducing the payroll tax rate from 6.2 per cent to 5.9 per cent, from 1 July 2008;
· reducing, from 6 May 2008, the current conveyance stamp duty rates with a new minimum rate of 1.5 per cent and a maximum rate of 4.95 per cent that applies from a property value of $525 000; and
· introducing, from 1 July 2008, payroll tax legislation that is harmonised with every other state and territory in eight key areas.

In relation to the reduction in conveyance stamp duty rates, this is the first overall rate reduction since 1994. It will also result in an increase in the stamp duty first home owner concession from the first $350 000 of a property’s value to the first $385 000.

This reduction provides savings to all conveyances that are subject to stamp duty. Based on 2007 data, ABOUT 8000 Territory homebuyers, investors and businesses are expected to receive stamp duty savings. More specifically, Over 1300 first home buyers, 1700 other home buyers, 3400 residential investors and 1400 commercial property buyers will benefit. Collectively, these changes will save taxpayers $12 million in conveyance stamp duty in 2008-09.

These changes are proposed to apply to instruments executed on or after 6 May 2008. Purchases secured prior to 6 May 2008, either by a contract or option, will not be eligible for the reduced rates.

Madam Speaker, the Government has demonstrated its commitment to reducing the burden of payroll tax on businesses. Over several Budgets it has increased the payroll tax exemption threshold from $600 000 to $1.25 million and has also reduced the rate from 6.5 per cent to 6.2 per cent.

In line with its 2005 election commitment, this Government will further reduce the payroll tax rate from 6.2 per cent to 5.9 per cent, with effect from 1 July 2008.

This measure will benefit all employers that pay payroll tax in the Territory, nearly 1600 employers, at an expected cost of $7.2 million in 2008-09.

The proposed harmonisation of payroll tax legislation wILL streamline administration for all businesses that operate in the Territory but will provide the greatest benefits to those Businesses that also operate interstate.

Although national reforms have been agreed in eight payroll tax areas, the Territory already complies in some respects.

madam speaker, i will now provide greater detail of the changes proposed by The Pay-roll Tax Amendment (Harmonisation) Bill 2008.

firstly, it proposes to tax a living-away-from-home allowance by the amount that exceeds the taxable threshold for fringe benefits TAX RATHER than taxing the full amount of the allowance. exemptions will also be introduced for motor vehicle and accommodation allowances at standardised rates, below which payroll tax will not apply.

The Bill also proposes to align with other jurisdictions the rules relating to the treatment of employee share schemes and wages for work performed in another country.

Greater detail of all changes proposed by both Bills is set out in the Explanatory Statements accompanying the Bills.

several important changes are also proposed to enable the alignment of the grouping of employers for payroll tax purposes.

These include adopting rules where direct and indirect interests can be traced through corporations and aggregated to give a controlling interest greater than 50 per cent. These changes would apply to more complex business structures.

Currently, the Commissioner of Territory Revenue has a discretion to exclude a member from a payroll tax group where it operates independently of, and is not substantially connected with, the other members of the group. However, this is only available for groupings through discretionary trusts or where the services of employees are shared within the group.

The Bill widens this exclusion discretion to include group members that have been grouped under any of the revised grouping provisions, other than the grouping of related corporations under the Commonwealth’s Corporations Act.

Finally, The same payroll tax laws as those in New South Wales and Victoria are being adopted for the treatment of termination payments. These laws reflect the Territory’s current treatment of termination payments.

In addition to compliance cost savings delivered by the payroll tax haronisation measures, territory businesses are expected to save about $1.7 million in payroll tax in 2008-09.

Madam Speaker, I now turn to the other measures contained in the Revenue Law Reform (Budget Initiatives) Bill 2008, which unless otherwise indicated, are all proposed to commence from 1 July 2008.

If a deed is not otherwise subject to ad valorem duty, nominal stamp duty of $20 applies. In recognition that taxpayers incur costs in arranging for deeds to be stamped and that government also incurs costs in processing deeds, the Bill proposes to abolish nominal stamp duty on most deeds.

however, nominal stamp duty will be retained for deeds that relate to trusts to ensure that valuable transactions do not proceed without stamp duty being paid on them.

Madam Speaker, this Bill also proposes three measures to improve the integrity of the Stamp Duty Act, and to minimise the possibility of weaknesses in that Act being exploited.

The first measure proposes to treat exploration rights like other mining interests for stamp duty purposes, by including them within the definition of land. This addresses the current inequitable stamp duty treatment of such rights.

Madam Speaker, I am disappointed to say that this change also responds to practices to minimise stamp duty by artificially apportioning value that is properly attributed to mining tenements to exploration rights. Curbing these minimisation practices should reduce protracted and expensive valuation and legal disputes and provide a more equitable treatment of these types of interests.

THE BILL ALSO PROVIDES A STAMP DUTY CONCESSION WHEN AN EXPLORATION LICENCE or exploration retention licence IS CONVEYED PURSUANT TO A FARM-IN AGREEMENT. THIS CONCESSION ACKNOWLEDGES THAT WHEN A PERSON BECOMES ENTITLED TO ACQUIRE AN INTEREST IN AN SUCH A LICENCE BY CONTRIBUTING TO THE COST OF EXPLORATION, IT WOULD BE INEQUITABLE TO THEN ASSESS DUTY ON ANY INCREASE IN VALUE THAT RESULTS FROM SUCH EXPLORATION. INSTEAD, DUTY WILL BE ON THE CONSIDERATION OR THE VALUE OF THE EXPLORATION LICENCE OR exploration retention licence AT THE TIME THE FARM-IN AGREEMENT IS ENTERED INTO.

fURTHERMORE, The grant of new exploration rights, rather than the transfer of existing exploration rights, will remain exempt from stamp duty. ACCORDINGLY, This measure is not expected to significantly impact on the level of new exploration activity in the Territory.

Madam Speaker, a technical shortcoming has been identified in the stamp duty legislation. Doubt exists over the current practice of requiring stamp duty to be paid on the conveyance of a mining tenement before it is entered in the mining register.

In response, The second measure seeks to rectify this shortcoming by ensuring that stamp duty is paid on an unregistered instrument conveying a mining tenement before it is registered.

The last of these measures ensures that conveyance stamp duty is payable when a person acquires property from a non-discretionary trust as a purchaser rather than in their capacity as a beneficiary of the trust.

This corrects an oversight when new Taxation Administration ARRANGEMENTS wERE introduced from 1 January 2008. As such, it is appropriate for the proposed amendment to take effect from that date.

The Bill proposes several other measures relating to the new Taxation Administration Act.

Firstly, it proposes to clarify that revenue-related information can be provided to Northern Territory law enforcement agencies, such as the police and the Director of Public Prosecutions. This is consistent with the explicit disclosure powers previously available to the Commissioner.

The Bill also proposes to make it very clear that all members of a group for the purposes of a taxation law are jointly and severally liable for the tax of any group member. this UNcertainty was introduced when the new taxation administration act commenced from 1 january 2008 and, as such, it is proposed that the amendment take effect from 1 January 2008. This will also minimise the possibility of a group member avoiding a tax liability.

The last of these measures seeks to make minor consequential amendments to update obsolete references in other Territory legislation, as a result of the introduction of the new Taxation Administration Act. For example, references to the Commissioner of Taxes will be changed to the Commissioner of Territory Revenue.

Madam Speaker, I now turn to the final four measures proposed by the Bill that make minor changes to the Territory’s home ownership schemes.

The first home owner grant scheme and the stamp duty first home owner concession have very similar eligibility criteria and are administered in tandem. The measures proposed by the Bill seek to achieve even greater consistency in the administration of these schemes.

The first proposal seeks to align the interest rate and way in which interest is applied to a first home owner grant debt with that for a first home owner concession debt.

The second proposed change seeks to increase the time in which a prosecution for a contravention of the First Home Owner Grant Act may be commenced, from three years to five years from when the alleged offence occurred. Of note is that this change is intended to apply only to offences that are alleged to have been committed on or after 1 July 2008. A five-year time period is currently provided for the stamp duty first home owner concession.

The third proposal seeks to ensure that it is an offence under the First Home Owner Grant Act in all circumstances where materially false or misleading information is provided.

To alleviate concerns that a person may be unjustly prosecuted for providing A misleading document, it is a defence to this offence where the misleading aspect of the document is identified and corrected, to the extent the person can reasonably do so.

consistent with contraventions in relation to other taxation laws, further aspects of criminal responsibility are provided for in the Criminal code.

This proposal is similar to the current arrangements for the stamp duty first home owner concession.

The final proposed change seeks to excuse a conveyee from the residence requirements of the first home owner concession or principal place of residence rebate, provided there are special reasons, where there are two or more conveyees and at least one will comply with the residence requirements.

This is consistent with the intent of the legislation and the way in which the First Home Owner Grant Act operates.

Madam Speaker, I commend the Bills to the Honourable Members and table the Explanatory Statements to accompany the Bills.

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