STATE TAXATION LEGISLATION (MISCELLANEOUS AMENDMENTS) BILL 2006 Explanatory Memoranda
STATE TAXATION LEGISLATION (MISCELLANEOUS AMENDMENTS) BILL 2006
State Taxation Legislation (Miscellaneous
Amendments) Bill
Introduction Print
EXPLANATORY MEMORANDUM
General
The Bill amends the Duties Act 2000 to provide--
· an extension of the exemption relating to transfers of property
from a trustee to a beneficiary to confirm the intent of the
legislation in relation to transfers to beneficiaries of trusts,
whilst removing prejudicial elements for family trusts;
· additionally, amendments extending the relationship
breakdown exemption to property held in companies and trusts,
subject to certain restrictions;
· a new exemption in respect of transfers to public ambulance
services and clarification of the exempt status of certain other
bodies including community health centres.
The Bill amends the Land Tax Act 2005. It introduces the exemption as
outlined above for public ambulance services and clarifies the exempt status
of certain other bodies including community health centres. The Bill further
brings forward the use of land valuations to make them more
contemporaneous with the actual land tax year for which they are used,
including for electricity transmission easements, and abolishes indexation
factors and so facilitates the use of the same valuations for two years running,
including for electricity transmission easements.
The Pay-roll Tax Act 1971 is amended to introduce the exemption as
outlined above for public ambulance services and clarify the exempt status of
certain other bodies including community health centres.
The amendment to the Public Authorities (Dividends) Act 1983 to include
the Melbourne Convention and Exhibition Trust within the definition of a
"public authority" is to ensure that there is legislative authority for a
transparent process for the return of any surplus funds by the Trust to the
State.
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551456 BILL LA INTRODUCTION 22/8/2006
The Taxation Administration Act 1997 is amended to replicate provisions
required from the old Land Tax Act 1958 which specify certain
requirements for the issuing of certain joint assessments and ensure recovery
of land tax is not impeded during valuation objection, review or appeal.
The Bill also contains amendments to the Valuation of Land Act 1960.
These changes achieve the requirement that certain land taxpayers will be
able to object to a municipal land valuation shown in their land tax
assessment upon receipt of the assessment notice, provided they have not
already objected to that valuation within the previous 12 months.
Clause Notes
PART 1--PRELIMINARY
Part 1 of the Bill outlines the purposes of the Bill and contains the
commencement provisions.
Clause 1 outlines the purposes of the Bill.
Clause 2 Sub-clause (1) provides that the proposed Act comes into
operation on the day after the day on which it receives the Royal
Assent, except--
· sub-clause (2) provides that sections 17(1) and 20(2) are
deemed to have come into operation on 1 January 2006.
This is because the Land Tax Act 2005 came into
operation on that date and these changes are required to
apply from that date;
· sub-clause (3) provides that sections 6, 12 and 13 and
Part 4 are deemed to have come into operation on 1 July
2006. These all apply to the introduction of a new
exemption for public ambulance services and
clarification of the exempt status of certain other bodies
including community health centres.
PART 2--DUTIES ACT 2000
Part 2 of the Bill makes a range of amendments to the Duties Act 2000.
Clause 3 replaces section 36 of, and inserts new sections 36A, 36B
and 36C into, the Duties Act 2000. These deal with property
passing to beneficiaries under fixed trusts, discretionary trusts
and unit trust schemes.
The purpose of these sections is to provide specific exemption
criteria for the types of trusts intended to benefit from the
exemption and to reduce technical impediments.
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Section 36 deals with property passing to beneficiaries of
fixed trusts
Section 36(1) provides that no duty is chargeable in respect of a
transfer to a beneficiary of dutiable property that is the subject of
a fixed trust if the circumstances set out in sub-section (1)(a)
to (e) are satisfied. These include the requirement that any duty
payable when the dutiable property became subject to the trust
has been paid or the Commissioner is satisfied it will be paid
(e.g. where an assessment is pending).
Additionally, the beneficiary must have been a beneficiary of the
trust at the time the dutiable property first became subject to the
trust and the transfer is to the beneficiary absolutely or as trustee
of another trust of which all the beneficiaries are--
· natural persons who were beneficiaries of that other
trust at the relevant time; or
· a corporation as trustee of a further trust, all the
beneficiaries of which are natural persons who were
beneficiaries of that further trust at the relevant time.
Sub-section (1)(d) requires that the dutiable value of the property
transferred does not exceed the value of the beneficiary's interest
in the principal trust.
Sub-section (1)(e) provides that the Commissioner must be
satisfied that the transfer is not part of a sale arrangement or one
that involves any consideration, regardless of to whom or from
whom the consideration passed.
Sub-section (2) provides a concession from duty in respect of so
much of the dutiable value of the dutiable property that does not
exceed the value of the beneficiary's interest in the principal trust.
Sub-section (3) clarifies that nothing in section 36 limits the
application of the exemption in section 34 of the Duties Act 2000
(property vested in an apparent purchaser).
Sub-section (4) clarifies that a reference in sub-section (1) to
dutiable property becoming or first becoming subject to the trust
includes a reference to property from which that dutiable
property was derived, by subdivision or consolidation of titles.
It limits the reference to consolidated land derived from other
land, all of which was subject to the trust at a time when the
transferee was a beneficiary of the trust.
Sub-section (5) provides definitions for "fixed trust" and
"relevant time".
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Section 36A deals with property passing to beneficiaries of
discretionary trusts
Section 36A(1) provides that no duty is chargeable in respect of a
transfer of dutiable property that is subject to a discretionary trust
to a beneficiary of the trust if certain circumstances are satisfied,
these being that--
· any duty payable when the dutiable property became
subject to the trust has been paid or the Commissioner is
satisfied it will be paid;
· the beneficiary was a beneficiary at the relevant time
(as defined in sub-section (3)) or became a beneficiary
after the relevant time by reason of becoming a spouse
or domestic partner; or becoming an adopted child or
step child, or being a lineal descendant of a beneficiary
within a class of beneficiary described in the principal
trust; or being an adopted child, step child or lineal
descendant of a person who became a spouse or
domestic partner of a beneficiary;
· the transfer is to a beneficiary either absolutely or as
trustee of another trust where, at the time the trust
acquired the property, all the beneficiaries were relevant
beneficiaries as described in sub-section (3);
· if the transfer is to a corporate beneficiary absolutely, all
the shareholders were beneficiaries of the principal trust
at the relevant time;
· the Commissioner is satisfied that the transfer is not part
of a sale arrangement or one that involves any
consideration, regardless of to whom or from whom the
consideration passed.
Sub-section (2) clarifies that a reference in sub-section (1) to
dutiable property becoming or first becoming subject to the trust
includes a reference to property from which that dutiable
property was derived, by subdivision or consolidation of titles.
It limits the reference to consolidated land derived from other
land, all of which was subject to the trust at a time when the
transferee was a beneficiary of the trust.
Sub-section (3) defines "beneficiary", "discretionary trust",
"relevant beneficiary" and "relevant time" for the purposes of
section 36A.
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Section 36B deals with property passing to beneficiaries of
unit trust schemes
Section 36B(1) provides that no duty is chargeable in respect of a
transfer of dutiable property that is subject to a unit trust scheme
to a unitholder if certain circumstances are satisfied, these being
that--
· any duty payable when the dutiable property became
part of the scheme has been paid or the Commissioner is
satisfied it will be paid;
· the unitholder was a unitholder at the relevant time;
· the value of the property transferred does, as a
proportion of net trust assets, not exceed the unitholder's
entitlement when the scheme acquired the property;
· the unitholder's interest in the scheme is reduced by the
value of the property transferred;
· the Commissioner is satisfied that any applicable duty
under section 7(1)(b)(vi) has been paid;
· if the unitholder is a corporation, no change of 50% or
greater in its share ownership has occurred;
· the Commissioner is satisfied that the transfer is not part
of a sale or other arrangement for which there is
consideration for the transfer.
Sub-section (2) provides a concession from duty in respect of so
much of the dutiable value of the dutiable property that does not
exceed the value of the unitholder's interest in the scheme.
Sub-section (3) provides a concession from duty for a transfer to
a corporation unitholder in respect of so much of the dutiable
value of the dutiable property that is representative of the interest
in the corporation unchanged since the property was acquired by
the scheme.
Sub-section (4) clarifies that a reference in sub-section (1) to
dutiable property becoming or first becoming part of a scheme
includes a reference to property from which that dutiable
property was derived, by subdivision or consolidation of titles.
It limits the reference to consolidated land derived from other
land, all of which was part of the scheme at a time when the
transferee was a unitholder.
Sub-section (5) defines "relevant time" for the purposes of
section 36B.
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Section 36C provides that, subject to certain criteria, the
existence of a mortgage has been removed as an impediment
to application of the exemption
Section 36C(1) provides that, where the beneficiary or unitholder
gives a mortgage to secure an amount equal or greater than, or
assumes liability of the outstanding liability of, an existing
mortgage, the Commissioner will not consider such action part of
a sale arrangement the purposes of sections 36, 36A and 36B.
Sub-section (2) provides that, where the beneficiary or unitholder
gives a mortgage to secure an amount equal or greater than, or
assumes liability of the outstanding liability of, an existing
mortgage, the dutiable value of the transaction will, for the
purposes of sections 36 and 36B, be reduced by the liability
amount outstanding.
Sub-section (3) provides that the Commissioner will be satisfied
for the purposes of sub-sections (1) and (2)--
· if the mortgage was given as part of the acquisition
financing by the trust; or
· if the mortgage was part of a genuine refinancing of the
mortgage given as part of the acquisition financing by
the trust; or
· where any new borrowings have been applied to the
improvement of the dutiable property that is the subject
of the transfer.
Where the above circumstances do not apply, the Commissioner
will have a discretion to consider other circumstances.
Clause 4 inserts a new section 41A into the Duties Act 2000. This section
deals with property passing to beneficiaries of superannuation
funds and provides an exemption in circumstances similar to
those applying to transfers to beneficiaries of fixed trusts, ie the
requirement that any duty payable when the dutiable property
became part of the fund has been paid or the Commissioner is
satisfied it will be paid. Additionally, the beneficiary must have
been a beneficiary of the fund when the dutiable property first
became subject to the fund.
Sub-section (2) provides for apportionment. The transfer is only
to be exempt to that proportion of the property (in value terms)
that it represents to the beneficial interest, with duty being
payable on the balance exceeding that entitlement.
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Sub-section (3) clarifies that a reference in sub-section (1) to
dutiable property becoming or first becoming part of a fund
includes a reference to property from which that dutiable
property was derived, by subdivision or consolidation of titles.
It limits the reference to consolidated land derived from other
land, all of which was part of the fund at a time when the
transferee was a beneficiary of the fund.
Sub-section (4) provides a definition of "superannuation fund" to
mean a complying superannuation fund, a complying approved
deposit fund, a pooled superannuation fund or an eligible rollover
fund. Each of these has an existing definition in section 3 of the
Duties Act 2000.
Clause 5 substitutes a new section 44 into the Duties Act 2000, which
extends the exemption available on the breakdown of a marriage
or domestic relationship to property held in companies and trusts,
subject to certain restrictions.
Section 44(1) specifies the circumstances in which the exemption
applies to transfers of dutiable property. These include the
requirement that--
· the transfer is made solely because of the breakdown of
a marriage or domestic relationship; and
· the transferor is a party to the marriage or domestic
relationship or a trustee of a trust to which a party
(or both parties) is a beneficiary; and
· the transferee is--
· a party to the marriage or domestic relationship;
or
· a dependent child of a party to the marriage or
domestic relationship; or
· a combination of both the above; or
· a trustee of a trust of which the only beneficiaries
are a party to the marriage or domestic
relationship or a dependent child of such a party;
and
· no other person takes or is entitled to take an interest in
the property under transfer.
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Section 44(2) specifies the circumstances in which the exemption
applies in respect of a declaration of trust over dutiable property.
These are that--
· the declaration of trust has been made solely because of
the breakdown of the marriage or domestic relationship;
and
· the person declaring the trust is a party (or both parties)
to the marriage or domestic relationship; and
· the sole beneficiaries are--
· a party (or both parties) to the marriage or
domestic relationship; or
· a dependent child of a party (or both) to the
marriage or domestic relationship; or
· a combination of both the above.
Sections 44(3) and 44(4) deal with transfers of dutiable property
and declarations of trust over dutiable property on the breakdown
of a marriage or domestic relationship where the transferor or
person declaring the trust is a corporation.
In section 44(3), the transferee(s) is one of the transferees already
specified in section 44(1)(c). The corporation does not have to
be a family company. The other criteria are that--
· no other person takes or is entitled to take an interest in
the property under the transfer; and
· the dutiable value of the transfer does not exceed the
value of the interests in the corporation of the parties to
the marriage or domestic relationship; and
· as a result of the transfer, the value of the interests in the
corporation of the parties to the marriage or domestic
relationship is reduced by the same amount as the
dutiable value of the property transferred.
In section 44(4), the only persons who are beneficiaries are--
· a party (or both parties) to the marriage or domestic
relationship; or
· a dependent child of a party (or both) to the marriage or
domestic relationship; or
· a combination of both the above.
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Additionally, section 44(4)(d) stipulates that the exemption only
applies if, at the time of the declaration of the trust, the dutiable
value of the trust property does not exceed the value of the
interests in the corporation of the parties to the marriage or
domestic relationship.
Section 44(4)(e) requires that, as a result of the declaration of the
trust, the value of the interests of the parties to the marriage or
domestic relationship in the corporation is reduced by the same
amount as the dutiable value of the trust property.
Section 44(5) provides that, if a person would be entitled to an
exemption under section 44(3) or (4), but for the provisions
relating to dutiable value (section 44(3)(e) and 44(4)(d)), then a
concession from duty is available only to the extent of the value
of the interest in the corporation held by any party to the
relationship immediately before the transaction. If an amount
more than the party's interest should be transferred, duty will
apply to the difference between the entitlement as a shareholder
and the value of the transaction.
Section 44(6) clarifies that the value of the interest in a
corporation of a party to a marriage or domestic relationship is a
reference to the amount to which that party would be entitled on
a winding up of the corporation.
Section 44(7) provides a definition of "dependent child" for the
purposes of section 44.
Clause 6 inserts a new section 45A in the Duties Act 2000 which provides
an exemption from duty on the transfer of dutiable property or a
declaration of trust over dutiable property to be held on trust
for--
· an ambulance service;
· a community health centre;
· a denominational hospital;
· a multi-purpose service;
· a public health service;
· a public hospital;
· the Victorian Institute of Forensic Mental Health.
Section 45A(2) stipulates that nothing in this section limits the
application of any other exemption from duty, e.g. if a
denominational hospital is also a body established for charitable
purposes, this exemption may still apply.
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Section 45A(3) defines those bodies entitled to the exemption,
e.g. ambulance service, community health centre etc.
Clause 7 amends clause 5 of Schedule 2 to the Duties Act 2000 to confirm
that for the purposes of new sections 36(1)(a), 36A(1)(a),
36B(1)(a) and 41A(1)(a) the reference to duty charged by this
Act includes a reference to duty charged by the Stamps Act
1958.
PART 3--LAND TAX ACT 2005
Part 3 of the Bill makes a range of amendments to the Land Tax Act 2005.
The use of valuations for land tax purposes is brought forward by one year,
and indexation factors are, in consequence, abolished from the 2007 tax year.
The valuation cycle for transmission easements is clarified and amendments
are made to entitle taxpayers to object to the valuation of taxable land at the
time a land tax assessment is received. New exemptions are also inserted
into the Act.
Clause 8 repeals the definitions of "applicable general valuation" and
"subsequent general valuation" which are no longer required in
light of other amendments contained in the Bill which bring
forward the use of land valuation for land tax purposes by one
year.
Clause 9 substitutes a new section 19 for sections 19 and 20 of the Land
Tax Act 2005. The new section 19 provides for the taxable value
of land for a tax year to be an amount equal to the site value of
the land at the relevant date as a result of the bringing forward
by one year of the use of land valuation for land tax purposes.
The indexation factors are also abolished for every tax year from
2007.
The new section 19(2) clarifies the relevant date for land within
the municipal district of a municipal council to be the date
rateable properties were valued for purposes of the last general
valuation returned to the municipal council before 1 January in
the tax year. If there is a supplementary valuation for the land
after the return date of the last general valuation but before
1 January in the tax year, the relevant date is the return date of
the supplementary valuation. If land is not within a municipal
district of a municipal council, the relevant date for land is
31 December in the year immediately preceding the tax year.
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Clause 10 inserts a new section 21A in the Land Tax Act 2005 which
provides that, if a person referred to in section 16(6A) of the
Valuation of Land Act 1960 objects to a valuation under that
Act in relation to a land tax assessment notice, a decision on the
objection, or on review or appeal under that Act concerning the
objection, does not affect a land tax assessment issued in a
previous tax year using the same valuation.
Clause 11 Sub-clause (1) substitutes a new paragraph (b) for paragraphs (b),
(c) and (d) of section 27(1) of the Land Tax Act 2005 which
provides that, for every tax year after 2006, the taxable value of
transmission easements is to be the value as at the relevant
easement valuation date determined in a valuation made under
section 5B of the Valuation of Land Act 1960.
Sub-clause (2) substitutes sub-section 27(2) of the Land Tax Act
2005 which provides that the relevant easement valuation date for
a transmission easement in a tax year is to be the date as at which
a valuation of the transmission easement was last made in
accordance with section 5B of the Valuation of Land Act 1960,
being a date before 1 January in the tax year.
Clause 12 inserts into the heading to Division 4 of Part 4 of the Land Tax
Act 2005 the words "and Health Services" after "Charities".
Clause 13 inserts a new section 74A into the Land Tax Act 2005, which
exempts land used by certain community health centres, public
health services and hospitals and ambulance services from land
tax. With the exception of the public ambulance services, which
have previously received budget funding for state taxes, these
changes merely clarify the existing exempt status of these bodies.
The new provision does not alter the entitlement of any of these
bodies to the charitable exemption.
PART 4--PAY-ROLL TAX ACT 1971
Part 4 of the Bill makes an amendment to the Pay-roll Tax Act 1971.
Clause 14 substitutes a new section 10(1)(bc) in the Pay-roll Tax Act 1971,
which exempts wages paid by certain community health centres,
public health services and hospitals and ambulance services from
pay-roll tax. With the exception of the public ambulance
services, which have previously received budget funding for state
taxes, these changes merely clarify the existing exempt status of
these bodies. The new provision does not alter the entitlement of
any of these bodies to the charitable exemption.
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PART 5--PUBLIC AUTHORITIES (DIVIDENDS) ACT 1983
Part 5 of the Bill makes an amendment to the Public Authorities
(Dividends) Act 1983.
Clause 15 inserts the Melbourne Convention and Exhibition Trust into the
definition of "public authority". This will provide the legislative
authority to apply a transparent process for the return of cash
operating surpluses expected to be generated by the new
Melbourne Convention Centre to the State as they become
available over the operational phase of the contract term.
PART 6--TAXATION ADMINISTRATION ACT 1997
Part 6 of the Bill makes a range of amendments to the Taxation
Administration Act 1997 in relation to the servicing and withdrawal of
notices of joint assessments and the recovery of tax pending valuation
objection, review or appeal.
Clause 16 inserts a new section 14A in the Taxation Administration Act
1997 which specifies the persons to whom the Commissioner
must serve a notice of assessment or a withdrawal of that notice
where persons are jointly assessed or assessed as jointly and
severally liable under the Land Tax Act 2005 or the Congestion
Levy Act 2005.
Clause 17 Sub-clause (1) makes an amendment to section 96(1)(ca) of the
Taxation Administration Act 1997 which clarifies that an
objection can be made to a valuation made by a valuer nominated
by the Valuer-General that is used by the Commissioner in an
assessment of land tax.
Sub-clause (2) repeals section 97(5) of the Taxation
Administration Act 1997 following the abolition of indexation
factors.
Sub-clause (3) inserts a new section 100(5) in the Taxation
Administration Act 1997 to clarify that the time for a lodging of
an objection referred to in section 96(1)(ca) cannot be extended.
Clause 18 Sub-clause (1) inserts a new section 104(2) in the Taxation
Administration Act 1997 which provides that the Commissioner
may recover land tax pending the determination of an objection
and review of or appeal concerning that objection under Part III
of the Valuation of Land Act 1960.
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Sub-clause (2) inserts a new section 105(2) in the Taxation
Administration Act 1997 which provides for interest to be paid
in accordance with Division 1 of Part 5 of that Act following an
unsuccessful objection under Part III of the Valuation of Land
Act 1960.
Sub-clause (3) inserts a new section 115(1A) in the Taxation
Administration Act 1997 which provides that, where an
objection, review or appeal to a land tax valuation under Part III
of the Valuation of Land Act 1960 is allowed or partially
allowed, any amount paid under the land tax assessment that
exceeds the amount required under the Land Tax Act 2005 must
be refunded.
PART 7--VALUATION OF LAND ACT 1960
Part 7 of the Bill makes a range of amendments to the Valuation of Land
Act 1960 which clarify the provisions relating to the valuation of
transmission easements and entitle land taxpayers to make objections to
valuation used for land tax at the time a land tax assessment is received.
Clause 19 substitutes a new section 5B(2) of the Valuation of Land Act
1960 which requires the Valuer-General, at the request of the
Commissioner, to cause a valuation of each transmission
easement to be made as at 1 January in each even calendar year
and to give that valuation to the Commissioner before 31
December in that year. However, if under section 13DC(4) of
that Act, the Minister has determined a date other than 1 January
in an even calendar year for the municipal district, the valuation
of the transmission easement over land in that municipal district
must be made as at that date determined by the Minister.
Clause 20 Sub-clause (1) inserts a new section 16(6A) in the Valuation of
Land Act 1960 which allows a person who has been given a
notice of valuation by a municipal council and is assessed for
land tax based on that valuation to object to that valuation under
that Act.
New section 16(6B) provides that a person referred to in
section 16(6A) must lodge an objection to the Commissioner.
The objection, if lodged in time, must be forwarded by the
Commissioner to the municipal council that made the valuation
or caused it to be made.
New section 16(6C) is also inserted to clarify that, for the
purpose of any time period in Part III of the Valuation of Land
Act 1960 other than section 18, an objection referred to in section
16(6B) is taken to have been lodged at the time at which the
municipal council receives the objection from the Commissioner.
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Sub-clause (2) clarifies that section 16 of the Valuation of Land
Act 1960 does not apply in respect of an objection to a valuation
made by the Commissioner or for the Commissioner by the
Valuer-General or a valuer nominated by the Valuer-General.
Clause 21 inserts a new paragraph (c) in section 18 of the Valuation of
Land Act 1960 which provides that an objection by a person
referred to in section 16(6A) of that Act must be lodged within
2 months after receiving the notice of assessment of land tax.
Clause 22 inserts a new section 21A in the Valuation of Land Act 1960
which requires a copy of a notice of decision made on an
objection to be given to the objector and Commissioner by the
municipal valuer or the Valuer-General (as the case requires).
Clause 23 inserts a new section 33 in the Valuation of Land Act 1960
which provides for the new objection rights to apply to a person
who is assessed for land tax for 2007 and subsequent tax years.
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