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State Taxation Acts (Miscellaneous
Amendments) Bill
As Sent Print
EXPLANATORY MEMORANDUM
General
This Bill makes a number of miscellaneous technical amendments and
clarifications to the Duties Act 2000. It also inserts an anti-avoidance
provision in respect of unit trust scheme transactions, and strengthens the
current land rich provisions. It introduces a concession from motor vehicle
duty in favour of persons with physical disabilities acquiring vehicles that
have been modified to enable them to drive, and clarifies the dutiable value
of certain items following the Supreme Court decision in Royal & Sun
Alliance Insurance Australia Ltd v Commissioner of State Revenue.
The Bill also introduces amendments to the grouping provisions contained in
the Pay-roll Tax Act 1971 following the Court decision in The Muirs
Electrical Co. Pty Ltd v The Commissioner of State Revenue and removes the
pay-roll tax exemption in favour of wages paid or payable to apprentices and
trainees.
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 Sub-clause (1) provides that the proposed Act (other than
sections 4, 6, 13(2), 14, 16, 17 and 20) comes into operation on
the day after the day on which it receives the Royal Assent.
This ensures that most of the Act will not have retrospective
effect.
Sub-clause (2) provides that a number of the minor amendments
to the Duties Act 2000 are deemed to have come into operation
on 1 July 2001, being the date that Act came into operation.
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551063 BILL LA AS SENT 6/6/2003
Sub-clause (3) provides that section 4 is deemed to have come
into effect on 8 February 2003. This is consistent with the
Treasurer's announcement on 7 February 2003 that legislation
would be introduced, from that day, preventing the use of
complex unit trust schemes to avoid conveyance duty on property
transactions and ensuring the original intention of the legislation,
being that such transactions were dutiable, is maintained.
Sub-clause (4) provides that section 20(1) and (2) is deemed to
have come into operation on 7 May 2003. This is to ensure that
amendments relating to the pay-roll tax exemptions for
apprentices' and trainees' wages have effect from the date of the
Treasurer's budget speech.
Sub-clause (5) provides that section 16 concerning the motor
vehicle duty concession for disabled motorists comes into
operation on 1 July 2003.
Sub-clause (6) provides that section 20(3) comes into operation
on 1 January 2004.
PART 2--DUTIES ACT 2000
Part 2 of the Bill clarifies the operation of various provisions of the Duties
Act 2000. Minor technical amendments are made to the following
provisions: Chapter 1 (Preliminary (definitions)), Chapter 2 (Transactions
Concerning Dutiable Property), Chapter 3 (Certain Transactions Treated as
Transfers), Chapter 8 (Insurance), Chapter 9 (Motor Vehicle Duty) and
Schedule 2 (Transitional Provisions). An anti-avoidance provision is inserted
into Chapter 2 in relation to duty on transfers of dutiable property through
unit trust schemes, the land rich provisions in Chapter 3 are strengthened,
amendments are made to Chapter 2, 8, 9, and Schedule 2 following the
Supreme Court decision in Royal & Sun Alliance Insurance Australia Ltd v
Commissioner of State Revenue, and a new concession in respect of motor
vehicle duty is introduced into Chapter 9.
Clause 3 amends section 3 of the Act, which sets out definitions of terms
used in the Act.
Paragraph (a) amends paragraph (a) of the definition of "primary
production" to ensure the exemption from duty is available to
primary producers who undertake both primary and secondary
production, to the extent of their primary production activities.
Paragraph (a) also amends paragraph (e) of the definition of
"primary production" to clarify the exemption is available only
where cultivation is for the purposes of sale.
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Paragraph (b) adds a further paragraph to the definition of
"related person" for the purposes of the land rich provisions
contained in Chapter 3 of the Act. New paragraph (f) of the
definition will ensure persons are related where they acquire
interests in private corporations and those acquisitions evidence,
form, give effect to or arise from what is substantially one
transaction. This definition is intended to more closely align the
Victorian provisions with the equivalent Queensland and Western
Australian provisions.
Clause 4 Sub-clause (1) substitutes section 7(1)(b)(vi) of the Act.
Section 7 imposes duty on transactions concerning dutiable
property. The substituted provision ensures that, in addition to
the transactions listed in existing section 7(1)(b)(i)-(v), duty is
chargeable on any other transaction that results in a change in
beneficial ownership of dutiable property, except for an excluded
transaction. Sub-clause (3) inserts a definition of the term
"excluded transaction".
Sub-clause (2) inserts a new section 7(2A) into the Act, which
re-introduces a discretion similar to that contained in
section 64B(9)(d) of the repealed Stamps Act 1958. It ensures
that an excluded transaction will be dutiable if the Commissioner
is of the opinion that it is part of a scheme or arrangement that is
made with a collateral purpose of reducing duty otherwise
chargeable under Chapter 2. This clause comes into effect on
8 February 2003, being the day after the public announcement
that legislation would be introduced preventing the use of unit
trust schemes to avoid conveyancing duty on property
transactions.
Sub-clause (3) amends section 7(4) of the Act to define what
constitutes an excluded transaction for the purposes of section 7.
Excluded transactions are--
· the purchase, gift, allotment or transfer of any unit in a
unit trust scheme; or
· the variation, abrogation or alteration of a right
attaching to any such unit; or
· the redemption, surrendering or cancellation of any such
unit; or
· the variation or alteration of a right of a holder of any
such unit; or
· any combination of the transactions referred to in
paragraphs (a), (b), (c), or (d).
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Clause 5 Sub-clause (1) clarifies section 10(1)(a) of the Act by confirming
that life estates and estates in remainder in land are dutiable
property.
Sub-clause (2) amends section 10(1)(d)(iv) of the Act to clarify
that goods held on primary production land must be used for
primary production purposes to be exempt from duty.
Clause 6 inserts a new section 20(2) into the Act. Section 20(2) provides
that, in determining the dutiable value of dutiable property, there
is no discount for the GST (if any) payable on the supply of the
property. This amendment has been made to provide certainty
and clarity following the Supreme Court decision in Royal & Sun
Alliance Insurance Australia Ltd v Commissioner of State
Revenue, which questioned the imposition of insurance duty on
GST-inclusive premium amounts. This amendment also reflects
the government's announcement on 2 March 2000 that duty
would be charged on GST inclusive values once the
Commonwealth GST legislation came into force. This provision
is deemed to have effect from 1 July 2001, being the date the
Duties Act 2000 commenced.
Clause 7 amends section 24(2A)(a)(i) of the Act to clarify that dutiable
transactions involving partial interests in primary production land
may be aggregated for duty purposes.
Clause 8 Paragraph (a) amends section 31(3)(b) of the Act. Section 31(1)
of the Act imposes duty in situations where the transferee of land
is not the purchaser under the contract of sale. Section 31(3)
provides exceptions to section 31(1) where certain conditions are
met. Under section 31(3)(b) a transfer of land is not separately
and distinctly chargeable with duty if the transferee is a body
corporate and the purchaser was a director of the body corporate
when the agreement for sale was entered into. The amendment
confirms that the director must still be a director at the time of
transfer before this exception can apply.
Paragraph (b) amends section 31(3)(d) of the Act. Section 31(1)
of the Act imposes duty in situations where the transferee of land
is not the purchaser under the contract of sale. Section 31(3)
provides exceptions to section 31(1) where certain conditions are
met. Under section 31(3)(d) a transfer of land is not separately
and distinctly chargeable with duty if the purchaser was a related
body corporate of the transferee when the agreement for sale was
entered into. The amendment confirms that the purchaser must
still be a related body corporate of the transferee at the time of
transfer before this exception can apply.
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Clause 9 Sub-clause (1) inserts a new section 34(3) into the Act.
Section 34(3) confirms that the exemption from duty in respect of
property vested in an apparent purchaser and transferred to the
real purchaser applies where there is a change in the legal
description of the property, so that duty is only charged where
there is a change in the beneficial ownership of that property.
This amendment follows the decision in Commissioner of State
Revenue v Pattison (2001) VSC 113. In that case the purchaser
nominated a holding company to hold a parcel of real property.
The company subdivided the property, resulting in the issue of
two new certificates of title. The company then sold one lot to a
third party, and transferred the second lot to the purchaser.
The amendment is intended to ensure that the transfer by the
apparent purchaser to the real purchaser is not dutiable because
there is no change in beneficial ownership, even though the
description of the land may have changed. An example is
provided to illustrate how the provision is intended to operate.
Sub-clause (2) inserts a new section 35(3) into the Act.
Section 35(3) confirms that the exemption from duty in respect of
transfers to a trustee or nominee, to be held solely as trustee or
nominee for the transferor, applies where there is a change in the
legal description of the property, so that duty is only charged
where there is a change in the beneficial ownership of that
property. This amendment follows the decision in Commissioner
of State Revenue v Pattison (2001) VSC 113, outlined above.
The amendment is intended to ensure that a transfer made to a
trustee or nominee, to be held solely as trustee or nominee for the
transferor, is exempt where there is a change in the legal
description of the property but no change in the beneficial
ownership of that property. An example is provided to illustrate
how the provision is intended to operate.
Clause 10 amends section 38(2) of the Act by inserting the term "domestic
relationship" into that section. The effect of this amendment is
that the exemption from duty referred to in section 38 applies to
establishments of trust upon the breakdown of marriages and of
domestic relationships. This is consistent with other provisions
of the Act that treat the breakdown of either type of relationship
in the same manner for duty purposes and is in accordance with
the Statute Law Amendment (Relationships) Act 2001.
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Clause 11 amends section 41(1) of the Act to clarify that transfers to
trustees or custodians of superannuation funds must be made
without monetary consideration to qualify for this exemption
from duty. This amendment is necessary to restore the intention
of the exemption, being to permit duty-free contributions to
superannuation funds by members without diluting the assets of
the fund.
Clause 12 amends section 56 of the Act to ensure that the exemption from
duty in favour of transfers of farms to relatives or charities also
applies to transfers of life estates and estates in remainder.
This amendment is necessary to ensure the scope of this
exemption is not reduced by the amendment to section 10(1)(a)
which confirms that life estates and estates in remainder are
dutiable property (see clause 5(1)).
Clause 13 Sub-clause (1) substitutes section 72(2) of the Act with a
provision equivalent to section 75I(4) of the repealed Stamps
Act 1958. This substitution reintroduces provisions expressly
excluding a private corporation's shareholdings and interests in
subsidiary companies from the land rich test applied under
Chapter 3 of the Act. A note is included referring to section 74
of the Act, which contains the relevant definition of a subsidiary.
Sub-clause (1) also amends the reference to prescribed property
in section 72(2) by ensuring that the discretion to include
prescribed property in the land rich ratio calculation applies only
to paragraph (f) of section 72(2) and not to paragraphs (a)-(e)
and (g).
Sub-clause (2) substitutes the words "private company" with
the words "private corporation" in section 76(3)(a) of the Act.
This is a minor technical correction to ensure that private unit
trusts are not prejudiced.
Clause 14 inserts a new section 177(2A) into the Act. Section 177(2A)
states that an insurance premium is deemed to include any
amount in respect of GST on the supply to which the insurance
relates. This amendment has been made to provide certainty and
clarity for the insurance industry following the Supreme Court
decision in Royal & Sun Alliance Insurance Australia Ltd v
Commissioner of State Revenue, which questioned the imposition
of insurance duty on GST-inclusive premium amounts under the
now repealed Stamps Act 1958. This amendment also reflects
the Government's announcement on 2 March 2000 that duty
would be charged on GST-inclusive values once the
Commonwealth GST legislation came into force. This provision
is deemed to have effect from 1 July 2001, being the date the
Duties Act 2000 commenced.
6
Clause 15 inserts a new section 183(4), (5) and (6) into the Act.
Section 183(4) states that, as an alternative to applying for a
refund under the Taxation Administration Act 1997, a general
insurer may offset an amount equivalent to the amount of the
refund to which the insurer is entitled against any other payment
required to be made under the Act.
Section 183(5) states the conditions that must be satisfied before
an offset under section 183(4) can take place.
Section 183(6) clarifies that the alternative of offsetting under
section 183(4) is available irrespective of anything to the contrary
in the Taxation Administration Act 1997.
Clause 16 inserts a new section 218(2), (3) and (4) into the Act.
Section 218(2) states that, if a person with a physical disability
makes an application for registration of a motor vehicle, or for a
transfer of registration of a motor vehicle, and the motor vehicle
has been modified to enable that person to drive it, the amount of
duty payable in respect of that application for registration or for
transfer is to be reduced by the reasonable cost of the
modification.
Section 218(3) states that, if the reasonable cost of the
modification is greater than the amount of duty chargeable, no
duty is chargeable on the application. This is intended to place a
cap on the concession to ensure that the benefit cannot exceed the
duty which would otherwise be payable.
Section 218(4) states that, for the purposes of sub-sections (2)
and (3) the reasonable cost of a modification is the lower of the
actual cost of the modification or the price payable for that
modification in the open market. This permits an objective
measure of the reduction to be used if required.
Clause 17 inserts a new section 219(2) into the Act which states that, in
determining the dutiable value of a motor vehicle, there is to be
no discount for the amount of GST (if any) payable on the supply
of the vehicle. This amendment has been made to provide
certainty following the Supreme Court decision in Royal & Sun
Alliance Insurance Australia Ltd v Commissioner of State
Revenue, which questioned the imposition of insurance duty on
GST-inclusive premium amounts under the now repealed Stamps
Act 1958. This amendment also reflects the Government's
announcement on 2 March 2000 that duty would be charged on
GST inclusive values once the Commonwealth GST legislation
came into force. This provision is deemed to have effect from
1 July 2001, being the date the Duties Act 2000 commenced.
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Clause 18 inserts a new clause 19 into the transitional provisions in
Schedule 2 to the Act.
Clause 19(1) provides that, in ascertaining the value of anything
or the consideration or premium paid for anything, for the
purposes of the provisions set out in sub-clause (2), there is to be
no discount for the amount of GST (if any) payable on the supply
of that thing.
Clause 19(2) sets out the provisions of the former Stamps Act
1958 to which sub-clause (1) applies. These are--
· sub-division 6 of Division 3 of Part II and Heading VI
in the Third Schedule (Conveyance of Real Property
and Land Transfer); and
· sub-division 8 of Division 3 of Part II and Heading VIII
in the Third Schedule (Lease or Agreement for Lease);
and
· sub-division 11 of Division 3 of Part II (Insurance &
Assurance Business); and
· sub-division 16 of Division 3 of Part II and
Heading XXI in the Third Schedule (Motor Vehicle and
Heavy Trailer Registration).
Clause 19(3) provides that this clause applies, and is taken
always to have applied, from and including 1 July 2000. This is
the date the Commonwealth GST legislation came into operation.
Clause 19(4) ensures that this clause does not affect the rights of
the parties in the Supreme Court proceeding known as Royal &
Sun Alliance Insurance Australia Ltd (ACN 007 746 092) v
Commissioner of State Revenue (No. 4415 of 2002).
PART 3--PAY-ROLL TAX ACT 1971
Part 3 of the Bill clarifies the operation and extent of operation of various
provisions of the Pay-roll Tax Act 1971. These amendments are necessary
as the result of decisions made in Muir Electrical Co Pty Ltd v Commissioner
of State Revenue [2001] VSCA 86 and The Muir Electrical Co Pty Ltd v The
Commissioner of State Revenue (No 2) (No. 7634 of 2001). Part 3 also
effects removal of the pay-roll tax exemption currently available to
employers in respect of wages paid or payable to apprentices or trainees.
Clause 19 Sub-clause (1) substitutes paragraphs (b), (c) and (d) of
section 9A(1A) of the Act. Each new paragraph clarifies that the
reference to "a business" in the section was intended to include
"one or more businesses".
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The amendment also specifically clarifies that section 9A(1A)(d)
is to apply irrespective of whether the duties to be performed for
or in connection with the business or businesses of the associates
are specified in the relevant agreement, arrangement or
undertaking. This is in response to the finding by the Court of
Appeal in Muir Electrical Co Pty v Commissioner of State
Revenue [2001] VSCA 86 that paragraph (d) would not apply
where there was an agreement for the provision of services which
did not specify that the duties were to be carried on by the
employer's employees.
The original intent of section 9A(1A)(d) was that it would apply
to many different arrangements, which would be found to create
a group. These would be constituted by an employer and persons
who are associates of that employer, i.e.: where there was a
degree of dependence and connection between businesses.
The discretion contained in section 9A(1J) could then allow the
Commissioner of State Revenue to exclude a member from a
group for the purposes of the Act if the Commissioner was
satisfied as to certain matters set out in that sub-section.
New section 9A(1A)(d) clarifies that original intention.
Sub-clauses (2), (3) and (4) insert notes at the foot of sub-
sections (1A), (1B) and (2) of section 9A, which confirm that
each sub-section is subject to the discretion contained in
section 9A(1J). The grouping provisions are intended to apply to
many different arrangements. There is, then, the discretion to
exclude a member from a group.
Clause 20 achieves the phased abolition of the current exemption from pay-
roll tax for wages paid to apprentices or trainees.
Sub-clause (1) inserts a note at the foot of section 10(1)(k) of the
Act which confirms that the exemption in section 10(1)(k) does
not apply to wages paid on or after 1 July 2003 under training
agreements made on or after 7 May 2003, because of the
inclusion of new section 10(4).
Sub-clause (2) inserts a new sub-section (4) after existing
section 10(3) of the Act. This sub-clause specifies that
section 10(1)(k) does not apply to wages paid or payable on or
after 1 July 2003 to an apprentice under a training agreement
made on or after 7 May 2003. Therefore, there will be no
exemption from pay-roll tax for wages paid to an apprentice
under such a training agreement from 1 July 2003. Clause 2(4)
deems that clause 20 (1) and (2) comes into operation on 7 May
2003.
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Sub-clause (3) repeals section 10(1)(k) and new section 10(4).
Clause 2(6) provides that this sub-clause comes into operation on
1 January 2004. Therefore, it is from that date that the exemption
contained in section 10(1)(k) will be completely repealed for
wages paid to an apprentice under a training agreement made
before 7 May 2003.
10