Hansard debates

                                  DUTIES BILL
                                 Second reading

  Mr BRUMBY (Treasurer) -- I move:
That this bill be now read a second time.
This bill is  a major step in implementing the government's program of reforming
state  taxes and builds  on  work commenced under  the  previous government. The
primary purpose of the Duties Bill is  to replace  the current  Stamps Act  1958
with simple, clear and  equitable  legislation  drafted in contemporary language
and  modern style. The proposed changes will enhance  the prospect of uniformity
across jurisdictions,  with particular emphasis given to removing double duty on
cross-border transactions.

The Duties Bill is the product of  collaborations by the Victorian State Revenue
Office with  the revenue offices in  New South Wales, South  Australia, Tasmania
and  the Australian Capital  Territory as part  of an interjurisdictional stamps
rewrite project. Other jurisdictions have been consulted on  specific provisions
where Australia-wide consistency is an  important outcome. Duties acts have been
passed  by  both the New South  Wales and ACT parliaments, and  one of the great
strengths of the Duties Bill  is that it is  broadly  based on a uniform  model.
That  uniformity  is  reflected  in  the  bill's  arrangement,  its   underlying
conceptual   basis   and,   insofar   as  common  taxing  policies  between  the
jurisdictions exist, in the detail of the provisions.
The  proposed Duties Act  is  also the outcome  of  extensive consultations with
taxpayers and their advisers over the course of its development.

Comments received  have  been overwhelmingly supportive  of the rewrite  of  the
stamps  legislation and many  specific comments have  been incorporated into the
Duties Bill where desirable. Indeed, over the past several years amendments have
been made  to the Stamps  Act which  have implemented  a number  of the  reforms
flowing from the rewrite project. These were supported by this government during
its period in opposition.
The  introduction of  this bill is a key part of the government's  commitment to
ensuring  that  the taxation framework in this state is fair and  equitable  and
minimises the burden  on  business,  not least in terms of compliance costs. The
government's  review  of  state  taxes  is  charged  with  the  task  of  making
recommendations which would see  a reduction in the taxation burden on  business
in  Victoria.  Bringing  this rewrite  project  to fruition  also  reflects  the
government's commitment to ensuring that Victoria  has a never-before-seen level
of clarity and uniformity in state taxation legislation.

The proposed  Duties Act  will take effect from 1 July 2001.  Any changes  which
will  be required as a  result  of the review  of  state business taxes will  be
introduced at a later time. In the interim, it is  important that the government
take all necessary  steps  to  ensure  that the current legislation is clear and
reflects best practice. That is the purpose of this bill.
Some of the new  features of the Duties Bill in contrast  to the current law may
be outlined as follows. The Duties Bill replaces all  existing stamp duties with
the following duties:  transfer duty,  including  the anti-avoidance  provisions
known  as the land-rich  provisions;  lease duty; hire  of goods duty;  mortgage
duty; insurance duty  on general and life  policies; motor vehicle  registration
and transfer duty; and a  limited number  of general  duties. In contrast to the
Stamps  Act which  it replaces, the Duties Bill is structured  in such  a manner
that each duty head is contained in a separate chapter.

Similarly, unlike the  Stamps Act, exemptions  from  duty are contained  in  the
individual  chapters making up the bill, rather than being obscurely hidden in a
schedule  to the act. The terms  used throughout the proposed act are also to be
found in one place and are used consistently across the whole statute.
Under  the  Duties Bill  liability  for duty  on  dutiable  transactions  arises
differently  from the  current Stamps  Act. Under  the Stamps  Act, in all but a
small number of areas, duty is document based and liability to duty  arises when
documents are executed. While there has been a progressive movement over time to
insert  transaction-based  provisions  in  the Stamps  Act,  they  sat  somewhat
awkwardly in  a  statute  which  was  based  on  the  physical stamping of paper
instruments. Under the proposed duties act, it is a transaction  rather  than  a
paper  document that is liable for duty  and  the key date is the date that  the
transaction occurred.

Duty is therefore not so dependent on the  execution of  a document,  helping to
overcome a significant means of avoiding or deferring the payment of duty in the
past.  The transaction-based conceptual  underpinning of the Duties Bill is also
more consistent  with modern business  practices.  The general  approach  of the
Duties Bill, however, is to reflect the policy underlying the 

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Stamps Act, rather than to introduce significant changes to the taxation base or
to rates of  duty. One  change is that bonds, covenants and debentures have been
removed  from  the mortgage duty tax base,  thus  abolishing  a  number  of  the
nuisance taxes of  little value to the  revenue but administratively  cumbersome
and an impost on business.
The transfer chapter continues  to impose duty on dutiable transactions such  as
agreements, transfers  and  declarations of  trust.  However, in  line  with the
interests of clarity and certainty, a list of dutiable transactions  is provided
in the Duties  Bill.  The chapter also specifies those surrenders of an interest
in  land that  would not  attract duty  -- namely,  a  discharge of  mortgage, a
surrender of  lease and a redemption of units. The party liable for duty and the
taxing point in relation to a dutiable surrender of interest is also clarified.

With respect to the so-called land-rich provisions contained in chapter 3, there
are a number of minor departures from the current provisions. Honourable members
will recall that the land-rich provisions are designed to ensure that conveyance
duty is  not avoided  by means  of the creation of a land-rich corporate entity,
the transfer of shares in  which effects the same outcome  as a transfer of land
but in respect of which duty at  the lesser  marketable securities rate has been
chargeable. The land-rich provisions have been strengthened progressively in the
light  of compliance  activity.  The current  proposed  changes are designed  to
further strengthen the anti-avoidance capacity  of  the  provisions  to militate
against  their unfair or unreasonable  application, and also to  bring them into
line with those operating in New South Wales.

Turning to other provisions in the Duties Bill, in line with commitments made by
the  previous government under the Intergovernmental Agreement on  the Reform of
Commonwealth-State   Financial  Relations,  duty  on  the   transfer  of  listed
marketable securities has  been abolished and therefore this duty does not carry
forward into the Duties Bill.
The  Duties  Bill also reflects the outcome of a cooperative effort between  the
states to simplify  the  mortgage provisions and substantially reduce compliance
costs for taxpayers through uniform application of provisions. This major review
of the  mortgage provisions has  been developed in close  consultation with peak
industry bodies.  The model provisions  developed  by the  states  have received
significant  support from major financial and legal firms on the basis that they
promote  simplicity,  equity  and  reduce  compliance  costs  for  industry  and
consequently  for the community  at  large. It is  anticipated that these  model
provisions are to be enacted by all taxing jurisdictions.

Mention has already been  made of the removal of bonds, covenants and debentures
from the tax base.  Mortgage duty  will now  be imposed on advances made through
the provision  of funds by means of  a bill  facility arrangement  to align  the
Victorian  provisions  with those in  other jurisdictions. The  Duties Bill also
represents a significant advance in uniformity  across the states  for mortgages
of  assets  located  in  more  than one  jurisdiction.  The mortgage  provisions
effectively  apportion  duty  between the Australian  states  and  also  prevent
deliberate avoidance  and remove the  possibility of double  duty resulting from
different approaches. The provisions also remove the  necessity  of transporting
mortgage documents between  states for stamping  and include a range  of reforms
which further reduce  taxpayer  costs.  These measures together with streamlined
administrative  provisions ensure significant uniformity of treatment with other
jurisdictions.
With regard to lease duty, a single rate of 0.

6 per cent will apply, replacing the more complex arrangement  whereby  one rate
is charged on the rental component of a  lease and a different and higher amount
charged  on additional costs such as premium or royalties. This will represent a
saving to taxpayers and will promote greater administrative efficiency.
The  Duties Bill  also simplifies  the duty  imposed on  the  hire of  goods and
provides a clear nexus for duty in order  to reduce exposure to double taxation.
Duty will only be paid in Victoria if the goods  the subject of a hire  are used
solely or  predominantly in Victoria. Goods which are provided incidentally to a
service  will  be  exempt  from  duty,  and  the duty ceiling for special rental
agreements will be raised from $4000  -- an  amount that  has not  changed since
1981  --  to $10  000. These provisions will bring Victoria into line  with  New
South Wales.

The Duties Bill also provides a  greater degree  of clarity  to life and general
insurances. The existing Victorian life insurance provisions are more explicitly
identified  in the Duties Bill,  and the general insurance  provisions have been
recast  in the interests of uniformity. To avoid any exposure  to  double  duty,
premium can  be apportioned between  jurisdictions for duty  purposes  where the
risk is located in more than one place or between different types of insurance.
As mentioned at the outset, this bill represents a very significant step towards
the  reform  of state taxes.  It  gives Victoria modern  duties  legislation and
creates a high degree of uniformity with other states and 

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territories. The  Duties  Bill will  operate  in conjunction  with  the Taxation
Administration   Act   1997.  This  will  ensure   that   matters   of   general
administration, such  as penalties for  non-compliance and rights of  review and
appeal, are common  to other tax lines governed  by that act. The Duties Bill is
also an outcome of a very successful process  of consultation with practitioners
and with industry.  The  clarity it provides will bring greater certainty and it
will reduce  the  compliance costs to  business and the  broader  community. The
proposed act will also be easier to administer. The Duties Bill has been a  long
time in preparation, and as pointed out earlier, it has been drafted in light of
extensive  consultation not  only  with  affected parties  but  also with  other
jurisdictions -- and in particular, with  New South Wales, whose Duties Act 1997
has been the national template.
I commend the bill to the house.

Debate adjourned on motion of Ms ASHER (Brighton).
Debate adjourned until Thursday, 19 October.