Northern Territory Second Reading Speeches

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REVENUE LAW REFORM (STAMP DUTY) BILL 2007

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

These bills put in place a new taxation administration framework that provides standard rules for the administration of payroll tax and stamp duties. The centrepiece of the package is the new Taxation Administration Act, which is the end result of several extensive and useful consultation processes. This consultation with key stakeholders and users of the legislation has brought about a number of amendments and refinements along the way. I extend my thanks to the many professional groups and expert advisers who have provided input into the development of the legislation.

The new Taxation Administration Act contains more detail than the existing law, providing greater certainty on how it will be administered. This will help to reduce red tape, saving both taxpayer compliance costs and government administration costs. It is based on the model adopted by New South Wales, Victoria, Tasmania and the ACT, providing greater consistency across the states and territories. It will also provide increased efficiencies for taxpayers who operate across a number of jurisdictions.

The details of this package of bills are as follows. First and most importantly, the bills introduce a new Taxation Administration Act that will provide a simpler, clearer and standardised taxation administration framework for taxpayers, practitioners and administrators. The various administrative provisions provide for, amongst other things, the processes for paying tax, lodging returns and applications, reviewing decisions of the Commissioner of Territory Revenue, collecting tax, and ensuring compliance with the taxation acts.

Second, the amendments align the Stamp Duty Act with the new Taxation Administration Act. Some stamp duty provisions have been redrafted to use more contemporary legislative drafting style and to take advantage of updated terminology used in the new Taxation Administration Act. I emphasise that the policy behind the taxing provisions has not changed. The provisions have simply been redrafted for greater clarity and ease of reference.

Third, the current Pay-roll Tax Act and First Home Owner Grant Act have been amended to remove administrative provisions that are common to the new Taxation Administration Act such as investigation powers, confidentiality provisions and a review of the Commissioner’s decisions. Common terminology and provisions used in the Taxation Administration Act have also been incorporated into these acts. Again, there have been no changes made to the operation of the taxing provisions.

I turn to the overview of the new Taxation Administration Act. One of the key reasons for introducing new taxation administration arrangements is to standardise administration practises into one act that covers payroll tax, stamp duties and, to a lesser extent, the first home owner grant. Because the Commissioner of Territory Revenue is also responsible for administering mineral royalties, the new Taxation Administration Act’s standardised objection and appeal process which will also apply to mineral royalty decisions.

The new Taxation Administration Act provides common rules for the administration of payroll tax and stamp duties relating to the assessment of tax liabilities, refunds of tax, interest and penalty tax, returns, the payment and recovery of tax, record keeping rules, investigations, the disclosure of information, objections and appeals, and the prosecution of tax offences.

The new Taxation Administration Act also introduces the following new major practises and policies. In relation to assessments, the Commissioner can make an assessment on the basis of all information that is available to the Commissioner, including making an estimated assessment of a taxpayer’s liability where, for example, a taxpayer fails to lodge an instrument or return. In very limited circumstances, the Commissioner can make a negotiated assessment with the written agreement of the taxpayer. This recognises that through no fault of either the Commissioner or the taxpayer, there are unusual cases in which it is difficult to determine the taxpayer’s liability in a timely or cost-effective manner. However, the Commissioner cannot be compelled to make such an assessment. The new act also introduces a standard reassessment period that is generally limited to five years from the time of the initial assessment. This period is aligned with the entitlement of taxpayers to a refund of tax that has been overpaid and is consistent with the reassessment periods applied in the other states and territories.

A significant feature of the new Taxation Administration Act is that it requires taxpayers and their advisors to disclose all the facts and circumstances that will enable the Commissioner to correctly assess the taxpayer’s liability. Failure to do so is an offence subject to certain defences such as the taxpayer making a full disclosure to their advisor, and then relying on the advisor to make the disclosure. This requirement replaces the current inefficient process that can cause unnecessary delay in making the tax assessment, and enable someone to frustrate the process of making a tax assessment by withholding information until it is sought by the Commissioner.

Another aspect of the proposed laws is that the Commissioner may request a written valuation from the taxpayer where tax is determined by reference to the value of property. The Commissioner may recover from a taxpayer the cost of obtaining his own valuation if the taxpayer fails to provide a valuation when requested by the Commissioner, or the valuation obtained by the Commissioner exceeds the taxpayer’s valuation by 15% or more.

In relation to refunds of overpaid tax, the Commissioner will be able to credit the refund against other tax payable by a taxpayer or, with the taxpayer’s consent, against a future tax liability of the taxpayer. This process will alleviate businesses from the need to make payments when they are in credit, and provides for a more efficient tax collecting mechanism as the Commissioner is not required to refund an amount of tax and pursue the same taxpayer for an outstanding tax liability.

Furthermore, where the person seeking the refund of tax has recovered the tax from another person, refunds of tax may only be made where the Commissioner is satisfied that arrangements have been made to pass that refund onto the person who actually bore the incidence of the tax.

The new act has a comprehensive set of rules for imposing interest and penalty tax. Penalty tax of up to 200% was previously imposed by the legislation, with the Commissioner’s discretion to remit any amount of the penalty imposed. This discretion was administered through the issue of written guidelines which included rules for imposing an administrative interest charge.

The new penalty scheme is substantially the same as that embodied in the Commissioner’s administrative arrangements. The new scheme imposes interest on unpaid tax at the prescribed rate until the tax is paid in full. The prescribed rate is composed of a simple interest market rate determined each financial year, and a premium component to act as a deterrent to the Territory being used as a source of finance for tax debts.

In relation to penalty tax, the new act provides for a more certain and transparent approach to levying penalty tax and imposes the penalty tax on a scale that reflects the nature of the tax default by the taxpayer. For example, the bottom of the scale is that no penalty tax is imposed if the Commissioner is satisfied that the tax default arose from circumstances beyond a taxpayer’s control, and reasonable steps were taken to rectify the default. In contrast, at the top of the scale, penalty tax of 95% will apply if the taxpayer intentionally disregarded a taxation law and deliberately concealed information or hindered the investigations of the Commissioner. The Commissioner is also able to reduce penalty tax if a taxpayer makes a full disclosure of a tax default or cooperates fully during an investigation.

The new Taxation Administration Act also enables the Commissioner to approve special tax return arrangements for the lodgement and payment of tax, including special conditions such as specific record keeping requirements. These special tax return arrangements will provide flexibility in tax administration, and allow the Commissioner to respond to individual circumstances and changes in the way that business is conducted generally.

Similarly, the new act sets out the general administrative framework for arrangements to pay tax by instalments where a taxpayer is experiencing financial hardship. Such instalment arrangements were previously provided on an administrative basis.

A good taxation administration scheme provides sufficient powers for the prompt collection of tax and the effective recovery of unpaid tax. The new act includes a new mechanism that applies after a company has failed to pay its tax on time, and a notice has been served on the directors of the company. If the directors do not make the company take a commercially sensible action to address the continued non-payment of tax, then they personally become jointly liable for the tax owed by the company.

The new act also extends the Commissioner’s ability under the existing stamp duty landholder rules to restrict dealings in land by placing an encumbrance over land acquired under a transaction where tax has not been paid. If the tax remains unpaid for an extended period of time, an order to sell the land to recover the unpaid tax can be made to the Supreme Court.

To protect the Territory’s revenue, the Commissioner is currently empowered to investigate non-compliance with the taxation laws, including avoidance or evasion. The new act places limits on the Commissioner’s investigation powers in line with more contemporary standards.

The scheme of investigation powers clarifies the purposes for which an investigation can be conducted, including to determine whether a tax liability exists, audit tax records, gather information relevant to an objection or appeal against a decision of the Commissioner, determine whether a taxation law has been contravened or gather evidence of this, and to decide an application made under taxation law.

In administering the taxation laws, the Commissioner is provided with information relating to the personal, business or commercial affairs of tax payers. Given the nature of the information and the fact that the Commissioner may compel its provision, appropriate limitations are necessary on the disclosure of the information by the Commissioner, staff, former staff and others acquiring the information. The new Taxation Administration Act provides for the confidentiality of information under one act, whereas each taxation law previously had different provisions about the confidentiality of information.

In concluding, the new Taxation Administration and related bills will simplify and clarify components of the Territory’s taxation scheme. I have not set out in detail other features of the bill as they are broadly similar to the operation of the current taxation legislation.

Madam Speaker, further details about the bills are set out in the accompanying explanatory statements. I commend the bills to honourable members and I table copies of the explanatory statements.

Debate adjourned.

 

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