12 March 1991 - Current
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
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
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.