Northern Territory Second Reading Speeches

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PAY-ROLL TAX AMENDMENT BILL (NO. 2) 2005


Information :
Bills presented and read a first time.
____________________
Suspension of Standing Orders
Pass Bills through all stages

Mr STIRLING (Treasurer): Madam Speaker, I move that so much of standing orders be suspended as would prevent bills entitled Payroll Tax Amendment Bill (No 2) 2005 (Serial 3), Taxation (Administration) Amendment Bill (No 2) 2005 (Serial 4), and Stamp Duty Amendment Bill (No 2) 2005 (Serial 5) passing through all stages at these sittings.

Motion agreed to.
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Mr STIRLING (Treasurer): Madam Speaker, I move that the bills be now read a second time.

The bills seek to put in place a package of revenue measures announced as part of the 2005-06 budget and the recent Northern Territory election by proposing amendments to the Taxation (Administration) Act, the Stamp Duty Act and the Pay-roll Tax Act. The key proposals announced in the budget involve abolishing electronic debit transaction duty from 1 July 2005 and increasing, from 3 May 2005, the stamp duty first home owner concession from the first $125 000 of a property’s value to the first $200 000 of a property’s value.

In addition, the government subsequently made an election commitment that, from 1 July 2005, it would further increase the stamp duty first home owner concession from the first $200 000 of a property’s value to the first $225 000 of a property’s value, and increase the stamp duty principal place of residence rebate from a maximum of $1500 to a maximum of $2500.

The commencement date for these commitments has been brought forward to 20 June 2005 to avoid any disruption to the real estate market. All of these proposals are intended to complement the initiatives announced in last year’s budget that increased the payroll tax threshold to $1m and abolish debits tax from 1 July 2005. In all, taxes will cut by about $18m in 2005-06 and bank accounts held in the Northern Territory will be free from taxes for the first time in many years.

Madam Speaker, I will now address the changes proposed in the bills in more detail.

As part of the Territory’s commitment to national tax reform, it is proposed to abolish electronic debit transaction duty for transactions that occur after 30 June 2005. This will save Territorians $2.7m in 2005-06. Importantly, electronic debit transaction duty will remain payable for transactions that occur before 1 July 2005 and the old rule, such as the requirement to keep records, will continue to apply to those transactions.

Since coming to office, the government has made substantial changes to stamp duty on conveyancing of residential property. These changes have benefited Territory families and young people, assisting many hundreds of Territorians to get into their own home. When we came to office in 2001, the tax-free threshold that applied to first home buyers was $80 000. There was no concession at all for people purchasing their family home. We initially increased the tax-free threshold to $125 000 and introduced a principal place of residence rebate of $1500 for all Territorians buying their own home.

In the May budget, we increased the stamp duty first home owner concession from the first $125 000 of a property’s value, to the first $200 000 value of a property’s value; and now further to $225 000. This will more than double the stamp duty saving on the purchase of a first home. The maximum concession will increase from $3640 to $6800 for instruments entered into on or after 3 May 2005, and then to $8016 for instruments entered into on or after 20 June 2005. A total of 1400 Territorians a year will benefit from this increase in threshold.

The stamp duty principal place of residence rebate will also increase from a maximum of $1500 to a maximum of $2500 for instruments entered into on or after 20 June 2005. This will provide increased stamp duty savings of up to 67% for all Territorians buying a home to reside in, other than first home buyers; and 1900 people will benefit from the increase in this rebate. The revenue will be safeguarded for the increases in both stamp duty home owner concessions by ensuring that purchases secured prior to the nominated dates, either by contract or option, will not be eligible for the increased concessions. Stamp duty home owner concession increases are expected to cost $450 000 in 2004-05, and $5.7m on a full-year basis in 2005-06.

There are two other stamp duty initiatives, which have arisen from submissions to government, that set out sensible reasons why changes to the law are desirable. The first seeks to extend the stamp duty exemption for motor vehicles registered in the name of a totally and permanently incapacitated war veteran to include extreme, disabled adjustment war veterans. The fact that these war veterans were not eligible for the stamp duty exemption was brought to government’s attention by the Australian War Veterans EDA Society. These EDA veterans are the most disabled of all veteran pension recipients, and it is only appropriate that the exemption be extended to cover them. It is proposed that this exemption will be available for motor vehicle certificates and registration issued to these veterans on or after 1 July 2005.

The second seeks an exemption to the so-called family farm exemption. The exemption provides an incentive to encourage younger generations to continue to work the family farm, and to increase the use of more modern and productive farming techniques, by providing a stamp duty exemption on the transfer of the family farm to the next generation of the family. The exemption has been limited to pastoral property since it was introduced, due to the significant capital cost associated with that industry and the relatively low returns on their investment. However, this reasoning applies equally to other land-based primary producers and, accordingly, it is proposed to extend the family farm stamp duty exemption to property used for other forms of land-based primary production. In addition, the Territory’s current exemption is limited to transfers between natural person relatives and excludes land held in other structures such as companies and trusts. This does not address the commercial reality of how such property is generally held. For instance, primary production land may be held in a company or trust as a form of asset protection. To overcome this limitation, it is proposed to allow the exemption for transfers between family members, family companies in which all of the shareholders are family members, and trusts where the beneficiaries are all family members. It is proposed that the changes to the family farm exemption apply to instruments executed on or after 3 May 2005.

Another stamp duty proposal relates to the power provided to the Commissioner of Taxes under the Taxation Administration Act to extend the time for taxpayers to undertake actions required under the act, such as lodging documents for assessment and paying tax. To exercise this power, the commissioner must serve an instrument on each individual taxpayer. A minor amendment to the act is proposed, to operate from 3 May 2005, so that the commission can, by way of a published notice, grant general extensions of time to classes of people. The government has endorsed the commissioner utilising this power to issue a notice which will be affective from 3 May 2005, extending the time for lodging and paying duty on instruments that are conditional contracts. Previously, these instruments had to be lodged and paid within 60 days after execution. Where the conditions were not met, a refund would be made.

The new approach will only require the lodgement and payment of duty within 60 days after the contract becomes unconditional, subject to certain safeguards such as a maximum length of time before the instrument must be lodged, even if subject to unfulfilled conditions. This is a more efficient and fairer manner of assessing such instruments. Under stamp duty legislation, conveyances of dutiable property and marketable securities are assessed on the consideration or unencumbered value of the property conveyed, which ever is the higher.

Where such a contract includes an amount of consideration that is only payable on the happening of a future event, that is a contingent consideration, the consideration for the conveyance is taken to be the highest that could possibly be payable under the contract irrespective of whether that consideration is ultimately paid. This treatment is long established under the common law and is applied consistently in all states and territories, however, this may result in purchasers paying more stamp duty than if duty had been assessed only on the amount of consideration that is actually paid. In addition, due to the way in which stamp duty laws operate, these purchasers would not normally be entitled to any refund of stamp duty in the event that an amount of contingent consideration is not paid. Accordingly, it is proposed to allow a refund where stamp duty has been assessed and paid on the basis of contingent consideration included in a contract executed on or after 1 July 2005, and the full amount of that consideration is not subsequently paid, and will not be paid.

Finally, Madam Speaker, the payroll tax grouping provisions caused companies to be grouped where the same person or persons can control the businesses carried on by those companies because they hold the majority of the voting shares in the companies, or because they control the majority of votes at meetings of the directors of the companies. A recent New South Wales case has cast some doubt on whether those provisions apply to companies that are acting as a trustee of a trust. It was not intended that the grouping provisions be limited in this way. Accordingly, amendments are sought to reassert the operation of the grouping provisions in relation to corporate trustees. It is proposed that this amendment apply from 1 July 2005.

Debate adjourned.

 

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