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12 March 1991 - Current

Page 943
5 October 2000
                                  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.