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State Taxation Acts Amendment Bill
2012
Introduction Print
EXPLANATORY MEMORANDUM
General
The Bill amends the Duties Act 2000--
to replace the Commissioner's discretion not to
aggregate dutiable transactions with a specific exception
to the aggregation of dutiable property where vacant
land is bought by home builders;
to make provision in Part 4A for certain parallel
arrangements (including parallel home building
contracts);
to increase the rate of duty payable on new and near
new passenger cars, the dutiable value of which does
not exceed the Commonwealth's luxury car tax
threshold;
to extend the exemption from motor vehicle duty to
certain veterans assessed under the Military
Rehabilitation and Compensation Act 2004 of the
Commonwealth; and
to remove the exemption from duty for a grant of any
Crown lands by the Crown in right of Victoria.
571281 1 BILL LA INTRODUCTION 1/5/2012
The Bill amends the National Taxation Reform (Consequential
Provisions) Act 2000 to provide for the payment of penalties and interest in
relation to the State's notional GST liabilities.
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 for the commencement of the provisions in the Bill.
All provisions come into operation on the day after the day on
which the Bill receives Royal Assent except Division 3 of Part 2
and Part 3.
Division 3 of Part 2 deals with the rate of motor vehicle duty on
new or near new passenger cars and the extension of the
exemption from motor vehicle duty for incapacitated war
veterans' and comes into operation on 1 July 2012 to align with
the start of the next financial year.
Part 3 provides for the payment of penalties and interest in
relation to the State's notional GST liabilities and comes into
operation on 1 July 2012 to align with the start of the next
financial year.
PART 2--DUTIES ACT 2000
Part 2 of the Bill makes amendments to the Duties Act 2000 to replace the
Commissioner's discretion not to aggregate dutiable transactions in certain
circumstances with a specific exception for transactions involving vacant
land purchased by home builders. It also confirms that certain parallel
arrangements are subject to duty under the sub-sales provisions. Part 2 also
increases the rate of duty payable on new and near new passenger cars the
dutiable value of which does not exceed the Commonwealth's luxury car tax
threshold, and extends the exemption from motor vehicle duty to certain
veterans assessed under the Military Rehabilitation and Compensation Act
2004 of the Commonwealth. Finally, Part 2 also removes the exemption
from duty for a grant of any Crown lands by the Crown in right of Victoria.
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Clause 3 Subclause (1) substitutes section 24(2) of the Duties Act 2000 to
replace the Commissioner of State Revenue's discretion not to
aggregate certain dutiable transactions with an exception from
aggregation for vacant land purchased by home builders.
New section 24(2) provides that dutiable transactions are not to
be aggregated if the Commissioner is satisfied that--
the dutiable property the subject of the transactions is
vacant land; and
the transferee is a home builder. This duty exception is
only available for a builder who is registered as a
domestic builder under the Building Act 1993 and is a
builder within the meaning of the Domestic Building
Contracts Act 1995; and
the transferee intends to construct residential premises
on the vacant land for the purpose of selling that land to
the public.
Removing the Commissioner's "just and reasonable" discretion in
the existing section 24(2)and introducing this specific exception
from aggregation will provide certainty for taxpayers as to the
dutiable transactions that will not be aggregated.
Subclause (2) inserts a new section 24(7) to clarify that the
Commissioner may treat land as vacant land if satisfied that the
land is substantially vacant apart from there being the remnant of
any building, object or structure that the Commissioner is
satisfied has been preserved because of it heritage significance.
Clause 4 inserts a new section 24A to enable the Commissioner to reassess
the duty on dutiable transactions that were not aggregated due to
new section 24(2) of the Duties Act 2000 in certain
circumstances. These circumstances relate to the requirement
that the transferee intends to construct residential premises on the
vacant land.
Under new section 24A(1) dutiable transactions in respect of
vacant land that were not aggregated because of new
section 24(2) are chargeable with duty if any of the following
occurs in respect of the vacant land the subject of any of those
transactions--
another dutiable transaction occurs in respect of the
vacant land and at the time that the other dutiable
transaction occurs no residential premises that are ready
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for occupation as a place of residence have been
constructed on the land by the transferee.
For example, this will apply when the transferee transfers the
vacant land (or some other dutiable transaction occurs in respect
of the vacant land) so that the transferee no longer owns it
(or there is a change in beneficial ownership), and at the time of
that transaction, residential premises had not been constructed on
the land. Premises will be taken not to be constructed on the
vacant land if they are not ready for occupation as a place of
residence.
premises other than residential premises have been
constructed on the vacant land and those premises are
ready for occupation or use for the purposes for which
they were constructed. For example, this refers to a
situation where commercial premises are constructed on
the land;
the transferee has not constructed on the vacant land
residential premises that are ready for occupation as a
place of residence on the land within 5 years after the
date on which the land was transferred to the transferee.
This will apply if, at the end of the 5 year period, the
transferee has either not constructed a building on the
land or has started construction but the building is not,
by that time, ready for occupation.
New section 24A(2) provides that if duty is chargeable under
subsection (1) the Commissioner may reassess duty on the
transactions.
New section 24A(3) sets out the methodology for the
reassessment of duty in respect of each dutiable transaction
comprising vacant land to which subsection (1) applies.
This methodology allows the duty to be determined where either
multiple transactions need to be reassessed, or where only one
transaction needs to be reassessed. The methodology is as
follows--
firstly, aggregate the dutiable transactions that would
have been aggregated under section 24(1) but were not
aggregated because of new section 24(2) as if the
dutiable value of each transaction is the same as it was
at the time of the dutiable transaction; and
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secondly, calculate the duty that would be payable on
the dutiable value of the aggregated dutiable property;
and
thirdly, apportion the amount of duty that would be
payable on the aggregated dutiable property to each
dutiable transaction that would have been aggregated
but was not; and
the amount of duty payable for each dutiable transaction
that is chargeable with duty under subsection (1) is the
amount apportioned to it under paragraph (c), less an
allowance for any duty already paid in respect of that
transaction.
Subsection (3) operates so that each time subsection (1) applies
to a dutiable transaction comprising vacant land, the reassessment
of duty is undertaken on the same basis. It ensures that all
dutiable transactions which were disaggregated under new
section 24(2) are treated as aggregated for the purposes of the
calculation of duty payable in relation to land to which the
circumstances in subsection (1) have occurred. The dutiable
value of the aggregated dutiable transactions is determined based
on the dutiable value at the time the transactions originally
occurred. Duty is then calculated on the aggregated dutiable
value, and apportioned across each dutiable transaction (based on
the proportion of the dutiable value represented by each dutiable
transaction). An allowance is then given for duty already paid on
the relevant dutiable transaction due to the operation of new
section 24(2).
Example
On 1 September 2012, a builder acquires 10 lots of vacant land
by completing 10 dutiable transactions. The value of each
dutiable transaction is $100 000. The transactions would have
been aggregated under section 24(1) and duty would have been
calculated on an aggregated amount of $1 000 000. However, the
builder intends to construct residential premises on each lot of
vacant land. Section 24(2) applies and the transactions are not
aggregated and duty is calculated on each transaction separately.
On 1 September 2015, the builder on-sells two of the lots without
building residential premises on them. Duty is calculated in the
following way. The 10 dutiable transactions are aggregated
based on the dutiable value of the dutiable transactions at the
time they occurred (10 lots x $100 000 = $1 000 000). The duty
that would be payable on the dutiable value of the aggregated
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property is then apportioned to each dutiable transaction.
The builder is re-assessed for duty in respect of each lot the
builder on-sold, less an allowance for each lot for the duty
previously paid on it. The builder must pay the difference in
respect of each on-sold lot.
Subsection (4) clarifies when a liability for duty arises in respect
of the events listed in subsection (1)(a), (b) and (c).
Subsection (5) authorises the Commissioner to make a
reassessment if more than 5 years have passed since the initial
assessment was made.
Subsection (6) requires the transferee to lodge written notice with
the Commissioner within 30 days after becoming aware that any
of the circumstances set out in subsection (1) have occurred in
respect of any of those transactions.
Subsection (7) confirms that if a transferee fails to give written
notice to the Commissioner as required under subsection (6) it
does not affect the Commissioner's power to reassess duty under
new section 24A.
Division 2--Parallel Arrangements
Clause 5 Chapter 2 of the Duties Act 2000 imposes duty on the transfer of
dutiable property. Ordinarily a purchaser who enters into a
contract of sale of land will, at settlement, have the property
transferred into their name and will pay the duty on that transfer.
Alternatively, a purchaser under a contract of sale is able to
require the property be transferred to a person other than
themselves. Generally this will occur as a result of the original
purchaser nominating a subsequent purchaser, although it may
occur by other means such as novation.
In certain circumstances, Part 4A of Chapter 2 of the Duties Act
2000 operates to treat the type of transaction where the land is
transferred to a person other than the original purchaser under the
sale contract as a sub-sale. The underlying policy of Part 4A is to
treat a transaction as a sub-sale only where it is the result of a
commercial arrangement. An arrangement is considered to be
commercial if it has a profit element. Consequently, not all
transactions where there is a subsequent purchaser will be treated
as a sub-sale. For example, if the original purchaser is acting as a
mere agent for the subsequent purchaser, then Part 4A will not
apply.
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Clause 5 amends section 32B of the Duties Act 2000 to ensure
that parallel land and building contracts are subject to duty.
An example of a parallel arrangement is--
a builder (first purchaser) enters into a sale contract to
purchase vacant land from a developer;
the first purchaser nominates a home buyer (subsequent
purchaser) who will receive the vacant land from the
developer under the sale contract;
at or around the same time as the subsequent purchaser
acquires the rights under the sale contract, he or she
enters into a separate, parallel building contract with the
first purchaser to build a home on the vacant land.
Entering the building contract is integral to the
subsequent purchaser obtaining the transfer right.
In the case of parallel arrangements, a subsequent purchaser
(home buyer) would obtain a transfer right in respect of the
vacant land from a first purchaser (builder) where the subsequent
purchaser is enlisting the builder's services to build a home on
that vacant land. Parallel arrangements are clearly the result of a
commercial arrangement. The amendments to Part 4A ensure it
operates in accordance with its underlying policy intent, to
impose duty on transactions treated as sub-sales where there is a
commercial element present. Accordingly, where a parallel
arrangement exists, duty will be imposed on the transaction
between the developer and the first purchaser builder, and then
on the transaction between the first purchaser builder and the
subsequent purchaser. Ultimately there will be no change to the
duty payable by the subsequent purchaser. However these
changes ensure that the first purchaser builder pays duty on the
value of the land the subject of the sale contract.
Subclause (1) inserts a new definition of parallel arrangement
into section 32B(4) of the Duties Act 2000--
parallel arrangement means an arrangement entered into by a
subsequent purchaser or an associate of the subsequent purchaser
before, at the time or within 12 months after the subsequent
purchaser obtains a transfer right under a sale contract, under
which the following occurs--
if the subsequent purchaser obtained the transfer right
from a first purchaser--the first purchaser or an
associate of the first purchaser is required to construct,
or to arrange for the construction of, improvements to
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the property the subject of the sale contract for
consideration; or
if the subsequent purchaser obtained the transfer right
from another subsequent purchaser--the other
subsequent purchaser or an associate of that other
subsequent purchaser is required to construct, or to
arrange for the construction of, improvements to the
property the subject of the sale contract for
consideration.
The arrangement does not need to be conditional on the
completion of the sale contract, but it will in some way be
interdependent. This may not always be obvious on the face of
any documents recording the arrangement. For example, it may
be recorded in separate documents such as loan documents.
Furthermore, the arrangement may be entered into by a
subsequent purchaser before, at the time or within 12 months
after the subsequent purchaser obtains a transfer right.
Subclause (2) inserts new sections 32B(5) and (6) of the Duties
Act 2000.
New section 32B(5) provides that, for the purposes of the
definition of additional consideration in subsection (4), a
subsequent purchaser or an associate of a subsequent purchaser
who enters into a parallel arrangement is taken to have given or
agreed to give the consideration under that arrangement in order
for the subsequent purchaser to obtain the transfer right in
addition to any other consideration given or agreed to be given in
order for the subsequent purchaser to obtain the transfer right.
New section 32B(5) clarifies that, when determining whether a
subsequent purchaser gives additional consideration in order to
obtain the transfer right, the consideration given under a parallel
arrangement is in addition to the consideration given by the
subsequent purchaser to obtain the transfer right. Effectively this
ensures that a subsequent purchaser will always be taken to have
paid additional consideration when the subsequent purchaser
enters into a parallel arrangement.
New section 32B(6) provides that, for the purposes of
subsections 32B(4) and 32B(5), section 32V(3) does not apply.
A note is inserted at the foot of new section 32B(6) outlining that
section 32V(3) provides that consideration does not include any
amount paid or payable in respect of the construction of a
building to be built on land on or after the date of the relevant
transaction.
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Division 3--Motor Vehicle Duty
Clause 6 amends section 218(1) to provide for a new rate of duty of $6 per
$200, or part, on an application to register a new or near new
passenger car, the dutiable value of which is below the
Commonwealth's luxury car tax threshold, on or after 1 July 2012
by--
inserting a new subsection 218(1)(ia) to provide for the
new rate on new passenger cars; and
substituting $5 with $6 in section 218(1)(ab) to provide
for the new rate on near new passenger cars.
Passenger car is defined in section 3 of the Duties Act 2000.
Clause 7 inserts a new section 233E(2) to provide an exemption from duty
on an application for registration or transfer of registration of a
motor vehicle used for social, domestic or pleasure purposes.
The application for registration or transfer of registration must be
in the name of a person who--
is assessed under Part 2 of Chapter 4 of the Military
Rehabilitation and Compensation Act 2004 of the
Commonwealth as a person who has suffered an
impairment resulting from one or more service injuries
or diseases, the degree of which constitutes
40 impairment points or more; and
operates no other vehicle currently registered without
fee as an incapacitated war veteran's vehicle in
accordance with regulations made under the Road
Safety Act 1986.
This extends the motor vehicle duty exemption available to
incapacitated war veterans to those veterans who are
compensated under the Military Rehabilitation and
Compensation Act 2004 of the Commonwealth. This scheme
provides medical treatment and compensation for members and
former members of the Australian Defence Force, their
dependents and other eligible persons for injury, disease or death
that occurred on or after 1 July 2004.
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Division 4--Removal of exemption from duty for grants of Crown
land
Clause 8 substitutes a new section 51 into the Duties Act 2000.
This removes the exemption from duty for grants of Crown land.
An exemption from duty has been retained in respect of the
dedication of a free and perpetual right of way to the use of the
public.
PART 3--NATIONAL TAXATION REFORM
(CONSEQUENTIAL ARRANGEMENTS) ACT 2000
Part 3 of the Bill makes amendments to the National Taxation Reform
(Consequential Provisions) Act 2000 to provide for the payment of
penalties and interest in relation to the State's notional GST liabilities.
Clause 9 amends section 3, which provides definitions for the purposes of
the National Taxation Reform (Consequential Provisions) Act
2000, by inserting the following definitions--
GST law has the same meaning as it has in the A New
Tax System (Goods and Services Tax) Act 1999 of the
Commonwealth;
interest means the general interest charge the liability
for which arises under the Taxation Administration Act
1953 of the Commonwealth and which would otherwise
be payable if the GST law applied to a State entity;
penalties means any penalties imposed in respect of
GST by Part 4-25 of Schedule 1 to the Taxation
Administration Act 1953 of the Commonwealth and
which would otherwise be payable if the GST law
applied to a State entity.
Clause 10 inserts a new section 5(2) of the National Taxation Reform
(Consequential Provisions) Act 2000 to provide for the
payment pay to the Commissioner of Taxation of amounts
representing amounts that would have been payable as penalties
or interest in respect of amounts paid under subsection (1) if--
the imposition of that GST were not prevented by
section 114 of the Commonwealth Constitution; and
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section 5 of each of the GST Imposition Acts had not
been enacted.
PART 4--REPEAL OF AMENDING ACT
Clause 11 provides for the automatic repeal of this Act on 1 July 2013.
The repeal of this Act does not affect in any way the operation of
the amendments and repeals made by the Act (see section 15(1)
of the Interpretation of Legislation Act 1984).
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