Hansard debates

Mr PALLAS (Werribee—Treasurer, Minister for Economic Development, Minister for Industrial Relations) (10:19:55): In accordance with the Charter of Human Rights and Responsibilities Act 2006, I table a statement of compatibility in relation to the State Taxation Acts Further Amendment Bill 2019. Opening paragraphs In accordance with section 28 of the Charter of Human Rights and Responsibilities Act 2006 (Charter), I make this Statement of Compatibility with respect to the State Taxation Acts Further Amendment Bill 2019 (Bill). In my opinion, the Bill as introduced to the Legislative Assembly is compatible with the human rights as set out in the Charter. I base my opinion on the reasons outlined in this Statement. Overview The Bill makes a number of technical amendments to the Duties Act 2000 (Duties Act), the Land Tax Act 2005 (Land Tax Act) and the Valuation of Land Act 1960 (Valuation Act). Several of the amendments made by the Bill do not engage the human rights listed in the Charter because they either do not affect natural persons. However, the following amendments have been identified as potentially engaging human rights contained in the Charter: Duties Act • Amending the Duties Act to confirm the legislative basis for charging an insured with insurance duty when insurance is obtained from an insurer that is not an authorised or registered insurer under state or Commonwealth legislation. • Amending the primary production concession or exemption requirement to ensure that the primary production business in which the young farmer is engaged must be the business for which the farmland is used. Land Tax Act • Amending the definition of residential land to include land that contains a residence that is not currently capable of being occupied due to it being uninhabitable, but which may be made habitable. • Clarifying that for the purpose of accessing certain land tax exemptions, a reference to an owner of land does not include a beneficiary of a trust (including implied and constructive trusts) or a unitholder in a unit trust scheme to which the land is subject, with the exception of a vested beneficiary. • Amending the definition of the primary production land exemption requirement in the urban zone in Greater Melbourne to ensure that the working farmer for the exempt parcel of land is engaged substantially in a full time capacity in the primary production business for which the land is used by the owner. Human rights issues Right to property: Section 20 Section 20 of the Charter provides that a person must not be deprived of his or her property other than in accordance with law. This right is not limited where there is a law that authorises a deprivation of property, and that law is adequately accessible, clear and certain, and sufficiently precise to enable a person to regulate their conduct. Duties Act amendment—insurance duty The current definition of 'insurer’ in the Duties Act covers both general insurers and life insurers with a continuing liability to general insurance duty. The definition currently in force reflects amendments made due to life insurance duty being abolished in Victoria. However, the current drafting arguably, inadvertently restricts the meaning of 'insurer’ to persons registered or authorised under Commonwealth legislation to carry on insurance business in Australia. As a consequence, overseas insurers that offer insurance in respect of property or a risk in Victoria may fall beyond the reach of the insurance duty provisions, and an insured person would have no liability to pay insurance duty on premiums paid to an overseas insurer. This is not the intended operation of the insurance duty provisions, nor has it been the understanding of insurers. The Bill therefore makes technical amendments to the Duties Act to remove any ambiguity about the dutiable nature of insurance provided by an overseas insurer. Land Tax Act amendment—Vacant residential land tax: residential property Vacant residential land tax applies to residential land in inner and middle Melbourne that is left unoccupied for more than six months in a calendar year. Residential land is currently defined as land that is capable of being used solely or primarily for residential purposes, as in land with a habitable dwelling. The Bill will amend the definition to ensure that uninhabitable properties that are vacant for more than 2 years will become taxable if they remain uninhabitable. The Commissioner of State Revenue (Commissioner) will have discretion to extend time if there are acceptable reasons why a dwelling remains uninhabitable beyond the 2 year period. This amendment will ensure that dwellings are not left in an uninhabitable state indefinitely by encouraging owners of derelict properties to renovate and make such land available for rent or occupation or to sell the land. In this regard, the amendments are in keeping with the policy intention of increasing Victoria’s housing stock by encouraging residential property owners currently withholding their vacant residential properties from the market to make them available for rent or sale. Land Tax Act amendment—Vacant residential land tax: deemed owners of land held on trust The Bill amends the Land Tax Act to clarify that deemed owners of land (that is, beneficiaries under an implied or constructive trust) do not constitute 'owners’ of land for the purposes of the statutory exemptions from vacant residential land tax. The exemptions are intended to apply to natural persons who are the legal owners of residential land, and not corporate legal owners where land is held on trust. This amendment will prevent unvested beneficiaries of implied or constructive trusts from being treated as legal owners of affected residential land. This will avoid the inconsistent treatment of different lands held on trust. Land Tax Act and Duties Act amendments—Primary production exemption The Bill amends the Land Tax Act in relation to the land tax exemption for primary production land in a greater Melbourne urban zone. A stringent test applies to land in the urban zone within the boundaries of greater Melbourne to prevent developers who 'land bank’ in urban areas from accessing the exemption. The amendment strengthens the exemption test to ensure there is a sufficient connection between the owner of the land and the primary production business conducted on the land. A consequential amendment will also be made to the primary production business requirements for the young farmer duty concession and exemption in the Duties Act, which are based on the terms of the land tax exemption. These amendments reinforce the intent to help genuine primary producers running a business on their own land and to prevent exploitation by land banking developers. Land Tax Act amendment—definition of owner of land The Land Tax Act 2005 will also be amended concerning land held in implied or constructive trusts to address the unintended consequence of litigation where the Supreme Court ruled that the legislative definition of an 'owner’ extended to the beneficiary of an implied or constructive trust. The unintended consequence for the primary production land exemption for greater Melbourne urban zones and the principal place of residence exemption arises because these exemptions apply by reference to the owner of the land, and land tax is assessed by reference to the legal owner of land rather than the beneficial owner. Interpreting statutory references to 'owner’ to include the beneficiary of an implied or constructive trust undermines the integrity and efficacy of the affected land tax exemptions. Consequently, affected provisions of the Land Tax Act regarding the primary production and principal place of residence exemptions will be amended to ensure that references to an owner of land means the legal owner, and does not extend to a beneficiary of an implied or constructive trust. Is the right to property limited by these amendments? While the amendments referred to in this Statement arguably engage the right to property to the extent that they either broaden relevant tax bases or amend the law to prevent the unintended narrowing of the certain tax bases, the amendments do not constitute arbitrary deprivations of a natural person’s property. The imposition of tax in all these circumstances is precisely formulated to ensure that taxpayers pay the correct amount of tax or are the intended recipients of tax exemptions. The laws will all be adequately accessible, clear and certain, and sufficiently precise to enable affected natural person taxpayers to inform themselves of their legal obligations and to regulate their conduct accordingly. Further, the provisions under which the amendments will operate provide taxpayers with statutory protection under the Taxation Administration Act 1997 (Taxation Administration Act). The Land Tax Act and Duties Act are administered under the Taxation Administration Act, which establishes the Commissioner’s powers and obligations, taxpayers’ rights of objection, review, appeal and recovery, and provides a framework to protect the confidentiality of tax related information. Therefore, affected natural person taxpayers will not be deprived of their property other than in accordance with the law. The right to property is not limited by these amendments. All the amendments considered in this Statement are technical in nature, remove ambiguity or unintended operation, and ensure that the State’s taxation laws operate efficiently, fairly, and as intended. For these reasons, in my opinion the provisions of the Bill are compatible with the right to property in section 20 of the Charter. Retrospectivity: Section 27 Section 27 of the Charter is concerned with the retrospective operation of criminal laws. It provides that a person has the right not to be prosecuted or punished for things that were not criminal offences at the time they were committed. Although the provisions being inserted into the Duties Act pertaining to insurance duty do not amend any criminal laws, I note that they will have effect from 1 July 2014, being the date when the current definition was introduced into law. The amendments will therefore operate retrospectively. Retrospective operation is necessary to protect the public revenue already collected, reinforce the long-standing understanding and intention of the insurance provisions, and to ensure consistency (in respect of both past and future periods) with other jurisdictions’ provisions. Retrospective operation will neutralise any ambiguity that may have been created by the amendments made in 2014 when life insurance duty was abolished in Victoria, and avoids any potential risk of costly litigation for the State and taxpayers. Retrospective effect also prevents overseas insurers from gaining an unwarranted competitive advantage over Australian insurers since 1 July 2014. For these reasons, in my opinion, the provisions of the Bill are compatible with the rights contained in section 27 of the Charter. TIM PALLAS MP Treasurer