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LAND TAX BILL 2005

                             Land Tax Bill

                          Introduction Print

               EXPLANATORY MEMORANDUM


                                   General
The object of this Act is to replace the Land Tax Act 1958 with a modern
land tax framework that is easier for taxpayers to understand and for the
Commissioner of State Revenue to administer, removing obsolete or
historical provisions that have no practical application and ensuring
consistency with other Victorian taxation legislation.
This Act will also bring land tax within the operation of the Taxation
Administration Act 1997. This Act is a "taxation law" for the purposes of
the Taxation Administration Act 1997 and that Act is to be read together
with this Act.

                                Clause Notes

                       PART 1--PRELIMINARY
Part 1 of the Bill outlines the purposes of the Bill and contains the
commencement provisions.

Clause 1    outlines the purposes of the Bill.

Clause 2    provides that the Act will come into operation on 1 January 2006.

Clause 3    This clause contains the following definitions--
            "applicable general valuation" which is defined to mean, in
                 relation to a tax year, the last general valuation returned to
                 the municipal council before 1 January in the year
                 immediately preceding the tax year;
            "approved" which is defined to mean approved by the
                Commissioner;
            "controlling interest" which is defined as having the meaning
                 given in clause 48;
            "corporation" which is defined as having the meaning given in
                 section 9 of the Corporations Act;

                                       1
551251                                           BILL LA INTRODUCTION 6/9/2005

 


 

"domestic partner" of a person which is defined as meaning a person to whom the person is not married, but with whom the person is living as a couple on a genuine domestic basis, irrespective of gender (see sub-clause(2) for further clarification); "exempt land" which is defined to mean land that is declared by or under this Act to be exempt; "exempt transmission easement" which is defined to mean a transmission easement that is exempt from land tax under clause 87(1)(b); "exempt transmission easement holder" which is defined to mean a transmission easement holder who is exempt from land tax under clause 87(1)(a); "home unit" which is defined as a building or part of a building that is designed for use as a self-contained unit for living purposes and is situated on land owned by 2 or more persons as tenants in common or by a body corporate in which all issued shares are owned by 2 or more persons; "joint owners" which is defined to mean persons who own land jointly or in common, whether partners or otherwise or who are deemed by this Act to be joint owners; "land" which is defined to include all land and tenements and all interests in land; "mortgage" which is defined to include mortgages and other forms of security over land; "owner" which is defined in two parts: owner of land has the meaning given in clause 10; owner of a home unit has the meaning given in clause 12; "parcel" of land which is defined to mean any land that is contiguous or separated only by a road, railway or other similar area across or around which movement is reasonably possible and is owned by the same person; "principal place of residence" which is defined to include sole place of residence; "public sector superannuation authority" which is defined to mean a public body within the Financial Management Act 1994 that is required to submit an annual report under Part 7 of that Act in relation to a public sector superannuation fund; 2

 


 

"public statutory authority" which is defined to mean a public statutory body constituted under an Act but does not include a public sector superannuation authority; "related corporations" which is defined as having the meaning given in clause 47; "relative" which is defined to mean a person's spouse or domestic partner, a lineal ancestor or descendant of the person or their spouse/domestic partner, a brother or sister (or child of a brother or sister) of the person or their spouse/domestic partner, a spouse or domestic partner of their child or a spouse or domestic partner of their brother or sister; "return date" which in relation to a valuation is defined to mean the date on which the valuation is returned to the council by the person who carried it out; "site value" which is defined as having the meaning given in the Valuation of Land Act 1960; "special land tax" which is defined to mean land tax imposed under Division 5 of Part 2; "spouse" which is defined to mean a person to whom the person is married; "subsequent general valuation" which is defined to mean a general valuation returned to the municipal council after the applicable general valuation in that tax year but before 1 January in the tax year; "supplementary valuation" which is defined to mean a valuation that is supplementary to the last general valuation returned to the municipal council before 1 January in the year which immediately preceded the tax year; "taxable land" which is defined to mean all land that is not exempt land; "taxable value" which is defined in relation to land to have the meaning given in Division 3 of Part 2 and, in relation to transmission easements, to have the meaning given in clause 27; "tax year" which is defined to mean a year for or in which land tax is being assessed; "transfer" of land which is defined to include a conveyance of the land; 3

 


 

"transmission company" which is defined as having the same meaning as in the Electricity Industry Act 2000; "transmission easement" which is defined to mean an easement held by a transmission company; "transmission easement holder" which is defined as having the same meaning as in clause 4; "trustee" which is defined to include trustee, executor, administrator, guardian, liquidator and any persons having or taking upon themselves the possession, administration or control of land, income or other property affected by any express or implied trust or having the possession control or management of land of a person under any legal or other disability. It has a separate meaning under Division 1 of Part 4 (see clause 52); "Victorian Minister" which is defined to mean a Minister of the Crown in right of Victoria; "year" which is defined to mean a calendar year. Clause 4 defines a transmission easement holder for the purposes of the Act as being a transmission company that holds a transmission easement. Clause 5 provides that the Act is to be read together with the Taxation Administration Act 1997, which deals with matters of administration and enforcement of taxation laws. This Act is the first time that the Taxation Administration Act 1997 will apply to the administration of the land tax scheme in Victoria. Clause 6 provides that the Act binds the Crown. PART 2--IMPOSITION OF LAND TAX Part 2 of the Bill contains the legislative and administrative framework for the imposition of land tax in Victoria, by providing for-- · the general imposition of land tax in Victoria, who is liable for land tax and when land tax must be paid; · the scope of who is considered to be an owner of land for land tax purposes; · an explanation of what the taxable value of land is and how the prescribed indexation factors and valuations are used for land tax purposes; 4

 


 

· land tax on transmission easements; · special land tax. Division 1--Imposition of Land Tax Clause 7 provides that land tax is imposed on all taxable land in Victoria. The Act also imposes land tax on transmission easements and special land tax in certain circumstances. Clause 8 provides that an owner of taxable land is liable to pay land tax on the land. Clause 9 provides that the day specified in a notice of assessment of land tax must not be less than 14 days after the day the notice is served on the taxpayer. Section 14 of the Taxation Administration Act 1997 provides that tax is payable on the day specified in the notice. The effect of clause 9 is that taxpayers will have at least 14 days after the assessment notice to pay the tax. Division 2--Owners of Land Clause 10 defines an owner of land for the purposes of the Act as a person entitled to land for a freehold estate in possession, a person entitled to land under a Crown lease and a person entitled to the land under a licence from the Crown (if the person has a right of acquiring the fee simple, whether that right is absolute or conditional). The definition also includes a person who is a licensee of vested land under the Victorian Plantations Corporations Act 1993 or a person deemed by this Act to be an owner of land. Clause 11 defines a life tenant as a person who holds a life estate in possession in land. The Act deems this person to be the owner of land, instead of the person entitled to the fee simple in reversion or remainder. Clause 12 deems an owner of a home unit to be an owner for the purposes of this Act. The terms "land" and "owner" are specifically defined for the purposes of this clause. Clause 13 deems a person who disposes of land (by way of transfer, settlement, declaration of trust or other method) but retains possession to be the owner of the land for land tax purposes while they retain possession (but not to the exclusion of any other person). 5

 


 

Clause 14 deems a purchaser on credit or deferred payment or an assignee or transferee of such a purchaser to be an owner of land for the purposes of the Act. Clause 15 deems a purchaser of land under a contract of sale to be an owner of land for the purposes of the Act if the purchaser has taken possession of the land (but not to the exclusion of any other person). Clause 16 Sub-clause (1) deems a vendor of land under a contract of sale to be the owner of land for the purposes of the Act (but not to the exclusion of any other person), until the purchaser has taken possession of the land and at least 15% of the purchase money has been paid. Sub-clause (2) provides that sub-clause (1) applies regardless of whether the contract of sale has been completed by the transfer of land. Sub-clause (3) provides that the Commissioner of State Revenue may deem the vendor not to be the owner of land, even where 15% of the purchase money has not been paid, where the vendor entered into the contract of sale in good faith and not for the purpose of evading land tax and where the contract is still in force. Sub-clause (4) provides the circumstances in which certain money will be considered to be unpaid purchase money for the purposes of determining the percentage of purchase money that has been paid. Sub-clause (5) provides that, in cases where the vendor and purchaser are both deemed to be owners of the land, any land tax payable by the purchaser is to be deducted from any land tax payable by the vendor. Clause 17 deems a mortgagee in possession of land to be the owner of land for the purposes of the Act (but not to the exclusion of any other person). Clause 18 deems a person who has an equitable interest in land to be the owner of land for the purposes of the Act (but not to the exclusion of any other person). The clause also provides that any land tax paid by the legal owner is to be deducted from the land tax liability of the equitable owner. 6

 


 

Division 3--What is the Taxable Value of Land? Clause 19 Sub-clause (1) provides the manner in which the taxable value of land for the tax year is to be determined. In cases where the applicable general valuation has not been used for a previous assessment, the taxable value is an amount equal to the site value at the relevant date. If the applicable general valuation has been used for a previous assessment, the taxable value is an amount equal to the site value at the relevant date, multiplied by the prescribed indexation factor (if any) which applies to the land for the tax year. Sub-clause (2) provides that the "relevant date" for land within the municipal district of a municipal council is the date at which rateable properties within the municipal district were valued for the purposes of the last general valuation in the year immediately preceding the tax year. The sub-clause also provides that if the land has been valued for the purposes of a supplementary valuation after the return date of the last general valuation but before 1 January of the tax year, the "relevant date" is the return date of the supplementary valuation. Sub-clause (3) provides that the "relevant date" for land not within the municipal district of a municipal council is 31 December in the year immediately preceding the tax year. Clause 20 provides that an indexation factor for land within an area may be prescribed by the regulations and that the prescribed indexation factor is to be determined by the Valuer-General. The prescribed indexation factor must reflect half the aggregate movement in the site value of land classified residential, commercial or industrial within a particular area. Clause 21 provides that for the purpose of assessing land tax, the Commissioner may use valuations made by a rating authority within the meaning of the Valuation of Land Act 1960 or valuations made by the Valuer-General or a valuer nominated by the Valuer-General. Clause 22 provides the mechanism for determining the taxable value of part of land where the part of land has not been separately valued. In these cases, the taxable value of the part is the same proportion of the taxable value of the whole land as the area of the part bears to the area of the whole land. Clause 23 provides the formula for determining the taxable value of a home unit where there are 2 or more home units on land and where a home unit has not been separately valued at the relevant date. 7

 


 

Division 4--Land Tax on Transmission Easements Clause 24 provides for the imposition of land tax on transmission easements. Clause 25 provides that a transmission easement holder is liable to pay land tax on a transmission easement. Clause 26 provides that a notice of assessment for land tax on transmission easements must not specify a payment date which is less than 14 days after the day on which the notice is served on the taxpayer. Clause 27 provides the mechanism for determining the taxable value of a transmission easement and specifies how the taxable value is to be determined for the 2006, 2007, 2008 and ongoing tax years. The terms "prescribed indexation factor" and "relevant easement valuation date" are defined. Clause 28 provides that the Commissioner of State Revenue may enter into an agreement with a transmission easement holder in relation to the payment of tax on the transmission easement. This clause permits the payment of tax in instalments within such a time as set out in the agreement but must not be for a period exceeding 5 years. This clause does not limit the operation of the relevant Taxation Administration Act 1997 provision for arrangements for the payment of tax. Division 5--Special Land Tax Clause 29 provides for the imposition of special land tax. Clause 30 provides for the circumstances in which special land tax can be imposed on certain land that ceases to be exempt land. The clause specifically provides the exemptions to which the special land tax provisions apply. Clause 31 provides the circumstances in which liability for special land tax arises and who is liable for special land tax in each circumstance. If the land ceases to be exempt land immediately on change of ownership or within 60 days of the change of ownership, the person who was the owner immediately before the change is liable for special land tax. In all other cases, the person who owned the land immediately after it ceases to be exempt is liable for special land tax. Clause 32 provides that a liability for special land tax arises on the date when the land ceases to be exempt land. 8

 


 

Clause 33 provides that a notice of assessment for special land tax must not specify a payment date which is less than 14 days after the day on which the notice is served on the taxpayer. Clause 34 provides the circumstances in which the payment of special land tax may be deferred. These are limited to circumstances where the land has ceased to be exempt for reasons other than a change of ownership. PART 3--ASSESSMENT OF LAND TAX Part 3 of the Bill provides for the assessment of land tax, including the rate of land tax and special land tax, how land tax is assessed (including the aggregation of all lands owned at midnight on 31 December in the year immediately preceding the tax year), the exemption from aggregation for land owned by charitable institutions and municipal or public land, the mechanism for assessing joint owners and occupiers, the grouping of land owned by related corporations and the reassessment of land tax. Division 1--Rate of Land Tax Clause 35 provides for the general rate of land tax (including land tax on transmission easements) as set out in Schedule 1. The rate of special land tax is 5% of the taxable value of land. Division 2--How is Land Tax Assessed? Clause 36 provides that land tax is assessed on an aggregated basis, that is, on the total taxable value of all taxable land owned as at midnight on 31 December immediately preceding the tax year. Provision is also made for aggregating all transmission easements owned by a transmission easement holder on 31 December immediately preceding the tax year. Clause 37 provides that certain taxable land (owned by a charitable institution or held by a trustee on trust for charitable purposes or municipal or public land) is to be assessed separately and not aggregated. Clause 38 provides the mechanism for assessing joint owners of taxable land. Sub-clause (2) provides that joint owners of taxable land are to be assessed for land tax as if the land were owned by a single person, without regard to the separate interest of each joint owner or to any other land owned by the joint owner (whether this land is owned alone or jointly with someone else). 9

 


 

Sub-clause (3) provides that each joint owner is also to be separately assessed for land tax on their individual interest in the land and any other taxable land they solely own or have an individual interest in. Sub-clause (4) provides a formula for deducting an amount from the separate assessment of a joint owner to avoid double taxation. Sub-clause (5) provides that a joint owner may be separately assessed on their individual interest in the land under sub- clause (3), even though there is no land tax jointly assessable in respect of that land under sub-clause (2). Clause 39 Sub-clause (1) provides that, for the purposes of clause 38, where jointly owned land is exempt as the principal place of residence of one (but not all) of the joint owners, no land is assessable for the purposes of clause 38(2) but each joint owner who does not use and occupy the land as his or her principal place of residence may be separately assessed under clause 38(3). Sub-clause (2) provides that a joint owner of land that is exempt under the principal place of residence exemption (because of its use and occupation as the principal place of residence of another joint owner) is not liable to pay land tax if the land was used as the principal place of residence of both joint owners in the year or in 2 years preceding the tax year. The allowance of the second year preceding the tax year only applies in cases where the joint owner is not claiming the principal place of residence exemption on any other land. Sub-clause (3) provides that if any of the joint owners claiming an exemption under sub-clause (2) resumes use and occupation of the principal place of residence in the current tax year, the PPR exemption is cancelled. Sub-clause (4) provides that sub-clause (3) does not affect the operation of Division 1 of Part 4 (the PPR exemption). Clause 40 provides that in cases where 2 owners of land own the land in severalty (as tenants in common) but occupy it jointly, they are to be assessed as if they were joint owners of the land. Clause 41 provides for the assessment and liability of joint transmission easement holders. Sub-clause (2) provides that a joint transmission easement holder is to be jointly assessed in respect of a transmission easement as if the easement were held by a single person, without regard to the separate interest of each joint transmission easement holder in 10

 


 

that easement or any other transmission easement held by a joint transmission easement holder (either alone or jointly). Sub-clause (3) provides that each joint transmission easement holder is also to be separately assessed in respect of their individual interest in the transmission easement as if the transmission easement holder were holder of a part of the transmission easement in proportion to that interest and any other sole ownership of a transmission easement and their individual interests in any other transmission easement. Sub-clause (4) provides a formula for deducting from the land tax assessed for a joint transmission easement holder under sub- clause (3) an amount necessary to avoid double taxation. Sub-clause (5) provides that a joint transmission easement holder may be separately assessed under sub-clause (3) even though no land tax is jointly assessable in respect of that easement under sub-clause (2). Sub-clause (6) provides a definition of the term "joint transmission easement holder" for the purposes of this clause. Clause 42 provides for the assessment of an owner of land on which there are home units. For the purposes of assessing land tax payable on land on which home units are situated, the amount of the taxable value of the home units is to be deducted from the taxable value of the land. For the purposes of this clause, an owner of land on which home units are situated means the person who is owner of the land, regardless of whether they are also the owner of one or more of the home units. Clause 12(2) does not apply in determining who the owner of land is for the purposes of this clause. Clause 43 provides that where there is a mortgagee in possession of land, land tax is assessed at the rate that would have applied if the mortgagor had been in possession of the land. This only applies until the earlier of the two scenarios occurs--the mortgagee ceases to be in possession of the land or 31 December in the third year after the mortgagee took possession of the land. Clause 44 provides for the assessment of trustees in whom land is vested. Clause 45 provides for the assessment of long-term lessees who have become entitled to the estate before 30 December 1978. This provision applies specifically to one long-term lease in Victoria. In these cases, both the lessee and the owner of freehold estate are to be assessed for land tax. 11

 


 

Clause 46 provides that where it is necessary to assess land tax on part of the land, the land tax applicable to that part is the proportion of the land tax, assessed on the taxable value of the whole land, that the taxable value of the part bears to the taxable value of the whole land. Division 3--Grouping of Related Corporations Clause 47 specifies the circumstances when corporations are "related corporations" for the purposes of the Act. Sub-clause (2) provides that corporations are "related corporations" where one of the corporations controls the composition of the board of directors of the other corporation or is in a position to cast (or control the casting of) more than 50% of the maximum number of votes at a general meeting of the other corporation or holds more than 50% of the issue shared capital of the other corporation. Sub-clause (3) provides that corporations are "related corporations" where the same person or persons have a "controlling interest" (as defined in clause 48) in each of the corporations. Sub-clause (4) provides that corporations are "related corporations" where more than 50% of the issued share capital of one corporation is held by another (and its shareholders) and the percentage of the issued share capital of this second corporation held by the shareholders of the first corporation is more than the difference between 50% and the percentage of the issued share capital of the first corporation held by the second corporation. Sub-clause (5) provides that corporations are "related corporations" if they are both "related" to the same corporation by virtue of one of the applications of sub-clauses (2) to (4). Clause 48 provides a definition of a "controlling interest" in a corporation for the purposes of the grouping provisions. A person or persons are considered to have a controlling interest if that person or persons acting together can control the composition of the board of the corporations or are in a position to cast or control the casting of more than 50% of the maximum number of votes that might be cast at a general meeting of the corporation or hold more than 50% of the issued share capital of the corporation. 12

 


 

Clause 49 provides further matters to be considered in determining whether corporations are related corporations for the purposes of the Act. Sub-clause (1)(a) provides that corporations may be related corporations whether or not they own land in Victoria. Sub-clause (1)(b) provides that a reference to the issued share capital of a corporation does not include a reference to any part of it that carries no right to participate beyond a specified amount in a distribution of either profits or capital. Sub-clause (1)(c) provides that any shares held or power exercisable by a person or a corporation as a trustee or nominee for another person or corporation are taken to be also held or exercisable by the other person or corporation. This is subject to sub-clauses (1)(d) and (e). Sub-clause (1)(d) provides that any shares held or power exercisable by a person or corporation by virtue of the provisions of any debentures of another corporation or of a trust deed for securing any issue of any such debentures must be disregarded. Sub-clause (1)(e) provides that any shares held or power exercisable by (or a nominee for) a person or corporation (not being held or exercisable as referred to in sub-clause (1)(d)) are taken to be not held or exercisable by that person or corporation if the ordinary business of that person or corporation includes the lending of money and the shares are held or the power is exercisable only by way of security given for the purposes of a transaction entered into in the ordinary course of business in connection with the lending of money, not being a transaction entered into with an associate of that person or corporation within the meaning of the Corporations Act. Sub-clause (1)(f) provides that the composition of a corporation's board is taken to be controlled by a person or another corporation if the person or other corporation has the power to appoint or remove all or a majority of the members of the board. Sub-clause (2) provides that sub-clause (1)(f) does not limit the circumstances in which the composition of a corporation's board is taken to be controlled by a person or another corporation. Clause 50 provides for the grouping of related corporations as a single corporation for the purposes of the Act. When corporations are grouped, they are assessed jointly for land tax and are jointly and severally liable for land tax. 13

 


 

Division 4--General Clause 51 provides that the Commissioner may make a reassessment of land tax more than 3 years after the initial assessment, as provided for under section 9 of the Taxation Administration Act 1997. PART 4--EXEMPTIONS AND CONCESSIONS Part 4 of the Bill contains the land tax exemptions and concessions, which are based on ownership and/or use of the land. The following categories of exemption are provided-- · Principal place of residence exemption (Division 1)--this Division exempts owners (either natural persons or trustees of certain trusts) from land tax, where they use the land as their principal place of residence (PPR). In the case of trusts, claiming the exemption is based upon occupation by a beneficiary of the trust. Trustees of unit trusts or discretionary trusts are specifically excluded from the exemption, as are liquidators. Where a substantial business activity is conducted on the PPR, land tax applies only to the value of that part of the land used for business purposes. There are also other provisions to allow the exemption in particular circumstances, such as a temporary absence, where the owner of the land dies, the land becomes unfit for occupation, the owner is unable to occupy due to unforeseen circumstances (such as bushfire) or where an owner is moving between PPRs but because of the timing of the change, holds both lands as at 31 December. · Primary production land (Division 2)--this Division exempts land which is used for primary production or for the business of primary production, depending on whether the land is located within or outside greater Melbourne and whether it is in an urban zone. Where land is wholly or partly within greater Melbourne and in an urban zone, the land must be used solely or primarily for the business of primary production and have certain ownership qualifications. In all other cases, it is sufficient that the land is used primarily for primary production. · Sporting, recreational and cultural land (Division 3)--this Division exempts sporting, recreational and cultural land in specified circumstances. The criteria for the exemption varies, depending on whether the land is owned or leased. 14

 


 

· Charities (Division 4)--this Division exempts land used exclusively for charitable purposes. The exemption is based on the use of the land and applies regardless of ownership of the land. · Accommodation (Division 5)--this Division exempts land used and occupied for various accommodation purposes, such as rooming houses, caravan parks, retirement villages and certain residential and care services. · Public, Government and Municipal Land (Division 6)--this Division contains several exemptions: for Crown land, land owned by public statutory authorities and municipal and public land, except where it is leased and occupied for business purposes by other non-exempt bodies. · General exemptions (Division 7)--this Division provides several further exemptions-- · for land that is vested in or held on trust for an association of armed service personnel or their dependants and is used by members of the association for the purposes of the association (clause 83); · for land that is owned by or held on trust for friendly societies (clause 84); · for land that is vested in, or held on trust for non-profit organisations which are established for the purposes of conducting agricultural shows, farm machinery field days, and similar activities, where the land is used for the purposes of the organisation (clause 85); · for land used exclusively as a mine (clause 86). · Transmission Easements (Division 8)--this Division exempts certain transmission easements declared by the Governor-in- Council (on the Treasurer's recommendation). It also specifies how the disposition of transmission easements in certain circumstances, may affect such an exemption. 15

 


 

Division 1--Principal Place of Residence Clause 52 provides definitions that are specific to the principal place of residence exemption, that is: "acceptable delay", "discretionary trust", "trustee" and "unit trust scheme". "acceptable delay" means a delay in the commencement or completion of a building or other work necessary to enable the intended use and occupation of the land to become its actual use and occupation that is due to reasons beyond the control of the owner or trustee; "discretionary trust" means a trust under which the vesting of all or part of the trust property is required to be determined by a person either in identifying the beneficiaries or the amount of interest or both or will occur in the event that a discretion conferred under the trust is not exercised; "trustee" means trustee within the meaning of section 3(1) but does not include the trustee of a discretionary trust or of a trust to which a unit trust scheme relates or a liquidator; "unit trust scheme" means an arrangement made for the purpose, or having the effect, of providing facilities for participation by a person, as a beneficiary under a trust, in any profit or income arising from the acquisition, holding, management or disposal of property under the trust. Clause 53 provides that in order to be considered to be occupied as a principal place of residence, land must have a building affixed to the land (including a home unit) that is designed and constructed primarily for residential purposes and may be lawfully used as a place of residence. In determining whether land is used or occupied as a principal place of residence, consideration must be given to every place of residence of that person, both within and outside Victoria. Clause 54 Sub-clause (1) provides that land owned by a natural person that is used and occupied as their principal place of residence and land owned a trustee of a trust (where the land is used as the principal place of residence of a natural person who is a beneficiary of the trust) is exempt land. Sub-clause (2) provides that the land must have been used as the owner's principal place of residence since 1 July in the preceding tax year, unless the person became the owner after 1 July in the preceding tax year. 16

 


 

Sub-clause (3) provides that the exemption applies to land which is contiguous to the PPR land, enhances the PPR land and is used solely for the private benefit and enjoyment of the person who uses or occupies the PPR land. Sub-clause (4) provides that the exemption applies to land whether it is owned by a sole owner or joint owners. Clause 55 provides for the deferral of land tax on certain residential land (i.e. the type referred to in clause 54(2)) for 6 months. Clause 56 provides for the exemption to continue to apply despite an owner's temporary absence in some circumstances, such as where the person intends to resume occupation of the land as his or her principal place of residence, the person is not claiming the exemption for any other land in Victoria or elsewhere and the absence does not continue for a period of more than 6 years. The exemption does not apply where the owner rents out the land for a consecutive period of at least 6 months within a particular year. Clause 57 provides that the exemption continues for a period after the death of an owner who was previously entitled to the exemption. Clause 58 provides that the exemption applies to land which is unfit for occupation because of damage or destruction caused by events such as fire, earthquake, storm, accident or malicious damage, for a period of 2 years from the date that the land became unfit for occupation, with the potential for this period to be extended for a further 2 years at the Commissioner's discretion. Clause 59 provides that where a person or trustee purchases land for use and occupation as a principal place of residence (for themselves or in the case of a trustee, for use and occupation by a beneficiary) in a particular tax year, but at 31 December of that year uses other land as their principal place of residence, the new residence is exempt from land tax for the following year. The exemption is revoked where the owner or beneficiary does not use and occupy the land as his or her principal place of residence for at least 6 months, commencing within 12 months after the date on which the person or trustee became owner of the land. 17

 


 

Clause 60 provides that if an owner or beneficiary of a trust uses and occupies land as their principal place of residence on 31 December of a particular year and, on that date, is the owner of other land that they used and occupied for a period of 6 months within that year, then the second-mentioned land is exempt from land tax for the following year. The exemption is revoked if the owner or, in the case of land being sold by the trustee, the trustee, is still the owner of the property 12 months later. Clause 61 provides for a refund of tax paid where unoccupied land is subsequently used as a principal place of residence, in certain circumstances. If the owner is not entitled to a principal place of residence exemption in respect of any other land in that year, they are entitled to a refund of land tax paid in respect of land not occupied by them if that land is used and occupied as their principal place of residence for at least 6 months commencing within 12 months after the payment of the tax. A trustee who has paid tax for a year for land that is unoccupied is entitled to a refund of the tax if at any time during that or the following year the land is used as the principal place of residence of a beneficiary of the trust. There is no entitlement to a refund if the owner or trustee derived income from the land while it was not occupied as a principal place of residence. Clause 62 provides for a partial exemption in cases where part of the land is used for business activities. If land would otherwise be exempt under another provision of this Part but the property is used by any person to carry on a substantial business activity, the exemption applies only to the extent that the land is used for residential purposes. The value of the land is to be apportioned between business and residential purposes. The clause provides criteria for determining whether land is used by a person to carry on a substantial business activity. Further such criteria may be prescribed by regulation. Clause 63 provides for a partial exemption or refund of land tax in cases where the land has been used and occupied as the principal place of residence of one or more of the beneficiaries of a trust, where other beneficiaries have not used and occupied the land for this purpose. The land tax payable is apportioned accordingly. 18

 


 

Division 2--Primary Production Land Clause 64 provides definitions which are specific to the primary production land exemption, that is: "greater Melbourne", "proprietary company," "relevant period" and "urban zone". Clause 65 provides for the exemption of primary production land that is outside greater Melbourne. Land will be exempt where it is used primarily for primary production. Clause 66 provides for the exemption of primary production land that is in greater Melbourne but not in an urban zone. The exemption applies where the land is used primarily for primary production. Clause 67 Sub-clause (1) provides for the exemption of primary production land that is wholly or partly in greater Melbourne and wholly or partly in an urban zone, where the land is used solely or primarily for the business of primary production and where the owner is a natural person, a proprietary company or a trustee. Sub-clause (2) provides that the owner of land must be-- · a natural person who is normally engaged in a substantially full-time capacity in the business of primary production of the type carried out on the land; · a proprietary company in which all the shares are beneficially owned by natural persons; or · a trustee of a trust of which the sole business is primary production of the type carried on on the land, where each beneficiary is a natural person who is entitled to an annual distribution of the trust income under the trust deed and at least one of the beneficiaries is normally engaged in a substantially full-time capacity in the business of primary production of the type carried on on the land. Sub-clause (3) provides that for the purpose of sub- clause (2)(b)(ii), the principal business of a proprietary company is only considered to be primary production of the type carried on on the land if the main undertaking of the company is primary production of that type and the dividends are distributed according to the respective shareholdings in the company and at least 60% of those dividends were paid to persons normally engaged in a substantially full-time capacity in the business of primary production. In cases where no dividends have been declared during the relevant period, ordinary shares representing 19

 


 

more than 60% of the paid up shared capital of the company must have been owned for the relevant period by persons normally engaged in a substantially full-time capacity in the business of primary production. Sub-clause (4) provides that if 2 or more persons are the owner of a parcel of land and at least one of them is normally engaged in a substantially full-time capacity in the business of primary production and the others who are engaged in this capacity are relatives of a person so engaged and no other person is normally engaged in this capacity, the owners are deemed to satisfy the criteria under sub-clause (2). Sub-clause (5) provides that if a person, or 2 or more persons, own a parcel of land on which the business of primary production is carried on and a relative of the person (or each of the persons) is normally engaged in a substantially full-time capacity in that business and no other person is normally so engaged on the land, the owners are deemed to satisfy the criteria under sub-clause (2). Sub-clause (6) provides that, for the purposes of this section, a reference to issued share capital of a company does not include a reference to any part of it which does not have a right to unlimited participation in a distribution of either profits or capital. Clause 68 provides that the exemption applies to land being prepared for use primarily for primary production and where the land will become exempt land for the purposes of clause 65, 66 or 67 within 12 months after the preparatory activities commenced. The Commissioner may extend the 12 month period for preparatory activities for a further 12 months. Clause 69 provides that in order to obtain an exemption under clause 66, 67 or 68, the owner must apply to the Commissioner for the exemption and provide any information requested by the Commissioner to determine whether the exemption applies. Clause 70 provides that for the purposes of clauses 66 and 67, a parcel of land may be regarded as a separate parcel of land where it is occupied separately from or is obviously adapted to being occupied separately from other land in the parcel and the owner of the parcel is a natural person, proprietary company or trustee of a trust who meets the ownership requirements in clause 67. 20

 


 

Division 3--Sporting, Recreational and Cultural Land Clause 71 provides an exemption from land tax for an owner of land who leases the land for sporting, recreational, cultural or similar activities, where the land is available for use for these activities by members of the public and where the proceeds from the leasing are applied exclusively for charitable purposes. The owner must apply to the Commissioner for the exemption. Clause 72 provides an exemption from land tax for land owned by a non- profit organisation which uses the land for sporting activities (whether conducted indoors or outdoors) and for outdoor recreational, outdoor cultural or similar outdoor activities. The clause defines the term "non-profit organisation". Clause 73 provides a concessional rate of land tax (of no greater than 0.357% of the taxable value of land) for land owned and solely occupied by a club, as defined in this clause. Division 4--Charities Clause 74 provides an exemption for land used by a charitable institution exclusively for charitable purposes or where land is owned by a charitable body and is declared vacant for future use by that charitable body for charitable purposes. Where only part of land is used for charitable purposes, the taxable value of the land not used is apportioned as in clause 22. Division 5--Accommodation Clause 75 provides an exemption for land used and occupied as a rooming house, that is primarily used for low-cost accommodation by low-income earners. The rooming house must be registered under the Health Act 1958 and comply with the Commissioner's guidelines regarding the scope of what is considered to be low-cost accommodation. Where only part of the land is used for this purpose, there is provision for land tax to be apportioned accordingly. To claim the exemption under this clause, the owner must apply to the Commissioner for the exemption and provide any information requested by the Commissioner to determine whether the exemption applies. 21

 


 

Clause 76 provides an exemption for land that is occupied or currently available for occupation as a residential care facility or a supported residential service. Where only part of the land is used for this purpose, there is provision for land tax to be apportioned accordingly. To claim the exemption under this clause, the owner must apply to the Commissioner for the exemption and provide any information requested by the Commissioner to determine whether the exemption applies. The clause defines the terms "residential care facility" and "supported residential service". Clause 77 provides an exemption for land that is used as a registered caravan park, as defined in this clause. Where only part of the land is used for this purpose, land tax can be apportioned accordingly. To qualify for the exemption, the owner of a registered caravan park must apply for the exemption and provide any information requested by the Commissioner to determine whether the exemption applies. The clause defines the term "registered caravan park". Clause 78 provides an exemption for land that is occupied or currently available for occupation as a retirement village. Where only part of the land is used for this purpose, land tax can be apportioned accordingly. To claim the exemption under this clause, the owner must apply to the Commissioner for the exemption and provide any information requested by the Commissioner to determine whether the exemption applies. The clause defines the term "retirement village". Division 6--Public, Government and Municipal Land Clause 79 provides an exemption for Crown land. Clause 80 provides an exemption for land owned by a public statutory authority. The exemption does not apply where land or part of the land is leased or occupied for any business purposes by a person or body other than a public statutory authority or certain other exempt bodies, unless it is leased or occupied under an arrangement made with a municipal council for the purposes of promoting or assisting a decentralised industry. The Governor- in-Council has the authority to declare that a public statutory authority is not exempt from land tax. 22

 


 

Clause 81 provides an exemption for municipal and public land. The exemption does not apply where land or part of the land is leased or occupied for any business purposes by a person or body other than a municipal council or certain trustees (holding the land for a municipal or public purpose) or certain other exempt bodies, unless it is leased or occupied under an arrangement made with a municipal council for the purposes of promoting or assisting a decentralised industry. Clause 82 Sub-clause (1) provides that this Division does not apply to land owned or occupied by the Transport Accident Commission or the Victorian Urban Development Authority, except in certain circumstances. Sub-clause (2) provides that the Treasurer may declare land owned or occupied by the Victorian Urban Development Authority which is used for the provision of rental housing under a Commonwealth-State housing agreement to be exempt land, upon the recommendation of the Minister administering the Victorian Urban Development Authority Act 2003. Division 7--General Exemptions Clause 83 provides an exemption for land owned by or held in trust for an association of armed services personnel or their dependents and which is used by members of the association for the purposes of the association. The exemption does not apply where land or part of the land is leased or occupied for any business purposes by a person or body other than an association of armed services personnel or their dependents or certain other exempt bodies, unless it is leased or occupied under an arrangement made with a municipal council for the purposes of promoting or assisting a decentralised industry. Clause 84 provides an exemption for land owned by or held in trust for a friendly society. The exemption does not apply where land or part of the land is leased or occupied for any business purposes by a person or body other than a friendly society or certain other exempt bodies, unless it is leased or occupied under an arrangement made with a municipal council for the purposes of promoting or assisting a decentralised industry. Clause 85 provides an exemption for land owned or held by or in trust for a body established to conduct agricultural shows or farm field machinery days or similar activities, where the activities are conducted on a non-profit basis. 23

 


 

Clause 86 provides an exemption for land used exclusively as a mine. The clause provides a definition of "mine" for the purposes of the exemption. Division 8--Exemptions from Land Tax on Transmission Easements Clause 87 provides that the Governor in Council may exempt transmission easements or a transmission easement holder from land tax, by Order, on the recommendation of the Treasurer. Clause 88 Sub-clause (1) contains a presumption that certain types of dispositions of transmission easements will not be effective for the purposes of exempting the transmission easement holder from tax where the holder continues to use the easement. This ensures that the tax cannot be avoided by the disposition of easement holdings where a continued right of use remains. Sub-clause (2) provides the Commissioner with a discretion to exempt the transmission easement holder from tax under sub- clause (1). PART 5--RELIEF FROM OR POSTPONEMENT OF LAND TAX Part 5 of the Bill provides the mechanisms for dealing with circumstances where taxpayers are unable to meet their land tax liability, including relief provided by the Commissioner of State Revenue (where a land tax liability does not exceed $1000) and the Hardship Relief Board (where a land tax liability exceeds $1000). Division 1--Preliminary Clause 89 provides that for the purposes of this Part, the term "Board" means the Land Tax Hardship Relief Board. Clause 90 provides that this Part of the Act does not preclude the operation of section 49 of the Taxation Administration Act 1997, which allows the Commissioner to extend the time for the payment of tax by a taxpayer and accept the payment of tax by instalments and to determine whether there is to be interest imposed on the payments. 24

 


 

Division 2--Relief Clause 91 provides the grounds upon which a taxpayer may apply for relief from liability for land tax. The clause also provides that the application for relief must be in writing and be made to the Commissioner of State Revenue (if the amount of land tax assessed for a tax year does not exceed $1000) or to the Board (if the amount of land tax assessed for a tax year exceeds $1000). In addition, the application must be made within one month after the notice of assessment has been given to the taxpayer or at a later time, if allowed by the Commissioner or the Board. Clause 92 provides that the Commissioner may provide relief from the payment of land tax if the grounds under clause 91 are satisfied and the approval of the Treasurer is obtained. Relief can be in the form of waiving the tax wholly or in part, making a reassessment of the land tax or imposing any other condition on the grant of relief, as appropriate. Clause 93 provides that the Board may provide relief from the payment of land tax if the grounds under clause 91 are satisfied. If the Board decides to grant relief, it may direct the Commissioner to make a reassessment of tax and postpone the payment of tax (until either the land is sold or 5 years after relief is applied for, whichever occurs first) or waive the payment of tax. Clause 94 provides for reconsideration of the postponement of land tax where the Board has previously directed the Commissioner to do so. When reconsidering the postponement of land tax, the Board may, if it is satisfied that the grounds of the application have been established, waive the payment of the tax either wholly or in part and make a reassessment of the tax. Division 3--Land Tax Hardship Relief Board Clause 95 provides for the Hardship Relief Board, which consists of the Secretary to the Department of Treasury and Finance (or nominee), the Commissioner of State Revenue (or nominee) and a person selected by the Commissioner (or nominee) from a panel of 3 person appointed by the Governor in Council. The Board has the authority to regulate its own proceedings. 25

 


 

PART 6--SECURITY, RECOVERY AND ENFORCEMENT Part 6 of the Bill provides for the mechanism for enforcing a liability for land tax, by providing the mechanisms for security for land tax (by making it a first charge on land and allowing the registration of a charge on title), recovery of land tax (where there is a tax default), prohibiting the passing on of land tax (in certain circumstances) and anti-avoidance provisions. Division 1--Security for Land Tax Clause 96 provides that unpaid land tax (including special land tax) is a first charge on the land on which the tax is payable. Clause 97 provides that the Commissioner may register a charge on land under clause 96 with the Registrar of Titles, who must register the charge without cost. When the tax is paid, the Commissioner may remove or delete the charge. Division 2--Recovery of Land Tax Clause 98 provides that where there is a tax default in relation to land tax, the Commissioner may recover the amount from a lessee, mortgagee or occupier of the land and further sets out specific obligations and rights flowing from this. Division 3--Prohibition on Passing on Land Tax Clause 99 prohibits landlords from passing on land tax to residential tenants under a residential tenancy agreement entered into on or after 1 January 1998. Clause 100 prohibits transmission easement holders from passing on land tax to the owners of land encumbered by a transmission easement. Division 4--Tax Avoidance Schemes Clause 101 provides the definition of a "tax avoidance scheme" for the purposes of the Division. The clause details the factors which may be considered in determining whether there is such a scheme in operation. The clause also defines a "scheme" to include the whole or any part of a contract, agreement, arrangement, understanding, promise or undertaking (including all steps and transactions by which it is carried into effect), whether it is made or entered into orally or in writing, whether express or implied and whether or not it is enforceable. It also includes a plan, proposal, action, course of action, course of conduct (whether or not unilateral) or a trust. 26

 


 

Clause 102 provides that if the Commissioner considers that a person has participated in a tax avoidance scheme, the Commissioner may disregard the scheme and determine the land tax that would have been payable but for the scheme and make such an assessment or reassessment to give effect to that determination. PART 7--GENERAL Part 7 of the Bill deals with several miscellaneous aspects of the land tax scheme, including-- · providing for notices of acquisition (of land and transmission easements) and land tax certificates; · providing that the Commissioner can state a case for determination by the Supreme Court; and · a regulation-making power in relation to land tax. Division 1--Notices of Acquisition and Land Tax Certificates Clause 103 provides that a person who acquires land must give notice of the acquisition in the prescribed manner and containing the prescribed information. This clause also allows disclosure of this information to the Valuer-General. Clause 104 provides that a transmission easement holder must give notice of their acquisition of a transmission easement in the prescribed manner and containing the prescribed information. Clause 105 provides for the issue of land tax certificates, which show if any land tax is due or unpaid. A purchaser or mortgagee of land may apply to the Commissioner for a certificate under this clause. An application must be accompanied by the prescribed fee. If an application is made, the Commissioner must issue a certificate showing if there is any land tax due and unpaid on the land and any other information that he or she thinks appropriate. Division 2--General Clause 106 provides that the Commissioner may state a case for the opinion of the Supreme Court on any question of law that arises under the Act and the Court may give its judgment on these matters. Clause 107 provides that the Governor in Council can make regulations under the Act to give effect to any matter necessary to give effect to the Act. 27

 


 

PART 8--AMENDMENT OF TAXATION ADMINISTRATION ACT 1997 Part 8 of the Bill amends the Taxation Administration Act 1997 so that it applies to land tax. Clause 108 amends the Taxation Administration Act 1997 to provide that the Land Tax Act 2005 is a taxation law for the purposes of that Act. Clause 109 amends section 19(2) of the Taxation Administration Act 1997 (which provides that an application for refund cannot be made if a notice of assessment has already been issued), so that it does not apply for land tax purposes. Clause 110 amends the Taxation Administration Act 1997, to include Landata and the Director of Consumer Affairs Victoria as authorised recipients for the purposes of the disclosure of information under this Act. The clause defines "Landata". Clause 111 Sub-clause (1) inserts a new section 96(1)(ca) in the Taxation Administration Act 1997 to enable objections to valuations made by the Valuer-General that are used by the Commissioner for land tax assessment purposes. Sub-clause (2) inserts new sub-sections into section 97 of the Taxation Administration Act 1997, so that-- · a taxpayer cannot object to an assessment of land tax on any ground relating to the value of the land if the assessment is based on a valuation made by a rating authority under the Valuation of Land Act 1960; · the right of any person to object to a valuation in accordance with Part III of the Valuation of Land Act 1960 is not affected; · a taxpayer cannot object to an indexation factor prescribed for the purposes of section 20 of the Land Tax Act 2005. Clause 112 qualifies section 100A(1) of the Taxation Administration Act 1997 (which provides that if an objection concerns the valuation of land, the Commissioner must refer the matter to the Valuer- General or any other competent valuer for valuation of the property), so that it does not apply to an assessment of land tax. 28

 


 

Clause 113 amends section 111 of the Taxation Administration Act 1997 (which provides for the referral of matters to the Victorian Civil and Administrative Tribunal) to allow the Tribunal to review matters relating to valuations made by the Valuer-General, which are used for land tax purposes, to the same extent as it can under the Valuation of Land Act 1960. Clause 114 amends section 129 of the Taxation Administration Act 1997 (which provides for the use of copies and extracts of certain documents as admissible documents in court) so that it now includes land tax notices provided for under clauses 103 or 104 of the Land Tax Act 2005. Clause 115 amends section 135 of the Taxation Administration Act 1997, to provide a limitation on the jurisdiction of the Supreme Court in matters pertaining to the Land Tax Act 2005. PART 9--FURTHER AMENDMENTS, REPEALS AND TRANSITIONAL PROVISIONS Part 9 of the Bill repeals the Land Tax Act 1958, provides for transitional provisions under the new Act and makes consequential amendments to other Acts. Clause 116 repeals the Land Tax Act 1958. Clause 117 makes consequential amendments to other Acts as set out in Schedule 2. Clause 118 provides that Schedule 3, which contains transitional provisions, has effect. SCHEDULES SCHEDULE 1 LAND TAX RATES PART 1--GENERAL RATES OF LAND TAX Part 1 of Schedule 1 to the Bill sets out the rates of land tax for 2006, 2007, 2008 and subsequent years. 1.1 Land Tax for 2006 Table 1.1 sets out the rate of land tax for 2006. 1.2 Land Tax for 2007 Table 1.2 sets out the rate of land tax for 2007. 29

 


 

1.3 Land Tax for 2008 and subsequent years Table 1.3 sets out the rate of land tax for 2008 and subsequent years. PART 2--RATE OF LAND TAX ON TRANSMISSION EASEMENTS Part 2 of Schedule 1 to the Bill sets out the rates of land tax for transmission easements. 2.1 Rate of Land Tax on Transmission Easements Table 2.1 sets out the rates of land tax on transmission easements. SCHEDULE 2 Consequential Amendments Schedule 2 contains consequential amendments to other Acts. SCHEDULE 3 Transitional Provisions Schedule 3 contains transitional provisions as follows: Clause 1 defines the "commencement day" as 1 January 2006 and the "old Act" as the Land Tax 1958 as in force immediately before the commencement day. Clause 2 provides that savings and transitional provisions may be made by the regulations after enactment. Clause 3 confirms the application of the Interpretation of Legislation Act 1984. Clause 4 provides for the continuation of the old Act and regulations, where a provision continues to apply by force of this Schedule. Clause 5 provides for land tax capping under the old Act, so that if the land tax payable for 2006 on the land (under Schedule 2 of the old Act) would be different from the amount payable under this Act (Schedule 1), the amount calculated in accordance with the old Act is payable. Clause 6 provides that this Act applies to land tax for the 2006 tax year and each subsequent year and that the old Act continues to apply to land tax in any tax year prior to 2006. 30

 


 

Clause 7 provides that the exemption in respect of decentralised industries will continue to apply after the commencement day, provided that the land was exempt before the commencement day and that the land continues to be leased or occupied under an arrangement made by the former Victorian Development Corporation or a municipal council. 31

 


 

 


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