Hansard debates

Mr PALLAS (Werribee—Treasurer, Minister for Economic Development, Minister for Industrial Relations) (10:20:15): I move: That this bill be now read a second time. I ask that my second-reading speech be incorporated into Hansard. Incorporated speech as follows: I am pleased to introduce this bill which amends Victoria’s taxation and valuation laws including the Duties Act 2000, Gambling Regulation Act 2003, Land Tax Act 2005 and Valuation of Land Act 1960. The amendments being made by this bill will support effective and sustainable tax administration by continuing to improve Victoria’s revenue and valuation laws. The bill makes changes to better align provisions with their intended policy and effect, as well as addressing minor operational issues. The amendments will ensure that the State Revenue Office is positioned to meet the expectations of government and the community by maintaining best practice tax administration. The bill amends the Duties Act 2000 to confirm the legislative basis for charging an insured person with duty when general insurance is obtained from an overseas insurer. Insurance businesses operating in Australia are required to be authorised to do so under Commonwealth legislation. The Duties Act makes such insurers liable to remit duty on any general insurance they issue for risks in Victoria. However, if the insurer is located outside Australia, the duty liability falls on the insured party. Accordingly, an insured party is liable for insurance duty when the policy is taken out with an insurer who is not authorised under Commonwealth legislation to carry on insurance business in Australia. The application of insurance duty in this manner is longstanding, has always been intended to operate in this way and is consistent with how insurance duty operates in other jurisdictions. However, as a result of amendments made to the insurance duty provisions in 2014 as part of abolishing life insurance duty, a technical anomaly in the provisions has recently been identified that could allow an insured party who takes out insurance through unauthorised overseas insurers to avoid any duty liability. This creates unnecessary uncertainty, as well as a risk to the revenue or of costly litigation for the state. It could also leave Australian based insurers at a competitive disadvantage relative to overseas insurers, violating principles of competitive neutrality. The bill makes an amendment to the definition of an insurer to ensure that duty continues to apply whether the insurance is taken out through Australian or overseas insurers. To put the longstanding application of the provisions beyond doubt and confirm the duty that has been collected to date, the amendment will be taken to have applied from 1 July 2014, when the current provisions were introduced. The bill amends the Gambling Regulation Act 2003 to provide for an annual payment to the ANZAC Day Proceeds Fund out of the revenue raised by the point of consumption wagering and betting tax, which commenced on 1 January 2019. The Fund provides money for a range of welfare activities that support the veteran community. By longstanding tradition, the main source of support for the Fund is an annual donation of tax revenue raised from totalisator betting on ANZAC Day each year. The new point of consumption framework for wagering and betting taxes make this methodology impractical to apply. The information collected by the State Revenue Office to administer the point of consumption tax does not break down wagering and betting on a daily basis. To replace previous arrangements, the amendment enshrines into law an annual payment to the Fund of one-thirtieth of all wagering and betting tax revenue paid or payable for the month of April. This payment will be deducted from the balance of tax revenue currently paid into the Hospitals and Proceeds Fund, in a similar way to the monthly Victorian racing industry support payment. The amendment will provide certainty that support for the ANZAC Day Fund will continue. Compared to the previous arrangements, the annual donation to the Fund is expected to be higher. As a consequential amendment, the basis of the existing Victorian racing industry support payment will be changed from a cash basis to an accrual basis to align with the new annual ANZAC Day Proceeds Fund payment. While this amendment affects the distribution of revenue from wagering and betting tax, it does not change the amount of tax that is collected from operators, nor does it reduce the level of financial support for the Victorian racing industry. The amendments will take effect from 1 January 2020. The Land Tax Act 2005 imposes vacant residential land tax on residential land in a specified geographic area of inner and middle Melbourne that is left unoccupied for more than six months in a calendar year. Residential land is defined as land capable of being used solely or primarily for residential purposes, as in land with a habitable residence. The purpose of the vacant residential land tax is to encourage more properties to be made available for rent or occupation. Currently, where a residence on land is under construction or renovation, tax only begins to apply if the construction or renovation is unfinished after two years. However, there is no similar provision to deal with a residence that is uninhabitable on an ongoing basis, such as a derelict home or a home that has been deliberately left in disrepair. These properties can potentially remain outside the vacant residential land tax net indefinitely. The amendment provides that if two years have passed and an uninhabitable residence on the land remains uninhabitable, the land will become subject to vacant residential land tax. This is intended to encourage landowners to renovate their uninhabitable residences and make them available for rent or occupation. Consistent with the existing law, the Commissioner of State Revenue will have discretion to extend the period of non-application beyond two years if there are acceptable reasons that the home remains uninhabitable at that time. For example, if a property is uninhabitable due to the decisions of government (such as a road overlay or major construction project) this would be considered an acceptable reason to suspend the application of vacant residential land tax until the situation is resolved. The bill makes further amendments to the vacant residential land tax provisions to ensure they operate correctly, by excluding deemed owners of land held on trust as owners for tax exemption purposes, correcting a reference to the relevant year for determining the application of the tax, and clarifying that use and occupation of different kinds can be taken in aggregate when determining whether a property was used and occupied for more than six months. These changes will take effect from Royal Assent so that they apply from the 2020 land tax year onwards. The bill also amends the Land Tax 2005 in relation to the land tax exemption for primary production land in a greater Melbourne urban zone. The primary production land exemption from land tax has varying requirements depending on the location of the land. The most stringent requirements apply to land in an urban zone within the boundaries of greater Melbourne: these require the land to be owned by a genuine primary producer, and used by them primarily for a business of primary production. The intention of this stringent test is to prevent people who are land banking in urban areas from accessing an exemption. The basic wording of this exemption has not been reformed since it was introduced in the 1970s, and permits a number of business scenarios that do not align with the intended policy. For example, the current wording does not prevent the owner of the land claiming the primary producer exemption despite having no other connection to the primary production activity on that land.. The amendment strengthens the exemption test to restore the intended connection between the owner of the land and the business conducted on that land. This involves changes to clarify the way different types of owner are treated, including companies, superannuation trusts, and land in joint ownership. A consequential amendment will be made to the primary production business requirements for the young farmer duty concession and exemption in the Duties Act 2000, which are based on the terms of the land tax exemption. These amendments close unintended scenarios permitted by the broad wording. They will reinforce the intent to help genuine primary producers running a business on their own land, which the vast majority of owners already do. As such, the amendments will not affect the exempt status of their primary production land if it is located in the relevant zone. The land tax changes will take effect from the 2020 land tax year, with the young farmer duty concession amendment to take effect for contracts or arrangements entered into from 1 January 2020. The Land Tax Act 2005 will also be amended concerning land held in implied or constructive trusts. For land tax purposes, an owner of land is generally regarded as the registered proprietor or legal owner of the land such as the trustee of an express trust. In the 2015 Court of Appeal case of Konann Pty Ltd v Commissioner of State Revenue [2015] VSCA 268, the Court held that the legislative definition of an 'owner’ extended to the beneficiary of an implied or constructive trust. This had unintended consequences for the primary production land exemption for greater Melbourne urban zones, which applies by reference to the owner of the land. Interpreting an owner to be the beneficiary of the trust in this provision undermines the integrity of the exemption and puts revenue at risk. It also prevents the effective administration of the tax laws, because the existence of implied or constructive trusts is typically not 'knowable’ to the State Revenue Office, often requiring a determination by a court. The amendment makes targeted changes to affected exemptions, namely the primary production and principal place of residence exemptions, to clarify that an owner of land does not include a beneficiary of an implied or constructive trust. This will restore the original policy of assessing land tax by reference to the legal owner of land rather than the beneficial owner. These changes will take effect from Royal Assent so that they apply from the 2020 land tax year onwards. The bill amends the Valuation of Land Act 1960 to fix a deadline for the issue of notices of valuation by rating authorities. At present, rating authorities (i.e. councils) must issue valuation notices to ratepayers within two months of a declaration by the Minister for Planning that the general valuation has been returned and certified by the Valuer-General as 'generally true and correct’. Valuation notices are normally issued at the same time as council rate notices. With the centralisation of state valuation functions with the Valuer General from 2019 onwards, it is anticipated that the Valuer-General may finish the general valuation earlier in the year than under the previous decentralised regime. However, as the final step in this process (the Ministerial declaration) triggers a two-month deadline to issue valuation notices, councils could struggle to comply with the Act if the timing does not coincide with the issue of annual rate notices. To prevent this issue from arising, the proposed amendment replaces the floating two-month deadline with a fixed deadline of 30 September each year by which councils must issue valuation notices. The amendment will enable the general valuation process to be finished earlier without inadvertently imposing a burden on local councils to issue their rate notices earlier than in prior years. The amendment would be effective from the day after Royal Assent. The passage of this bill will confirm the intention behind various taxation laws and ensure that Victoria maintains best practice tax and valuation administration. I commend the bill to the house.