State Revenue Legislation Amendment
(Budget Measures) Bill 2005

This explanatory note relates to this Bill as introduced into Parliament.

This Bill is cognate with the Appropriation Bill 2005.

Overview of Bill

The objects of this Bill are as follows:

(a) to amend the Duties Act 1997 so as:

        (i) to impose a limit on the concession on mortgage duty that currently
applies when a mortgage is entered into for refinancing purposes, and
        (ii) to increase the duty payable on certain types of insurance policies, and
        (iii) to prevent the misuse of a concession that applies to vendor duty and
duty on the disposal of interests in land-rich entities, and

(b) to amend the Land Tax Act 1956 and the Land Tax Management Act 1956 to
re-introduce a tax-free threshold in respect of land tax and to provide for a new
rate of tax on land that has a value that exceeds that tax-free threshold.

The Bill also provides for savings, transitional and consequential matters.

Outline of provisions

Clause 1 sets out the name (also called the short title) of the proposed Act.

Clause 2 provides for the commencement of the proposed Act on the date of assent,
with some exceptions (explained below).

Clause 3 is a formal provision that gives effect to the amendments to the Acts set out
in Schedules 1–3.

Schedule 1 Amendment of Duties Act 1997 No 123
Refinancing concession
At present, mortgage duty is not payable on a mortgage where the mortgage is
created for refinancing purposes, that is, if the mortgage secures an amount borrowed
under an earlier mortgage in respect of which mortgage duty has already been paid.

The amendments impose a limit on this concession, so that mortgage duty is not
payable on the first $1,000,000 of the amount secured by the earlier mortgage.

Mortgage duty will be payable at the rate of $4 per $1,000 above that maximum. See
Schedule 1 [5]–[7].

The changes will not apply to refinancing mortgages where the property secured is
land used for primary production or aquaculture. See Schedule 1 [4] and [5].

A provision is also introduced to prevent persons from transferring mortgages in
order to avoid liability for mortgage duty. See Schedule 1 [8].

The amendments have effect from 1 August 2005.

Insurance duty
At present, for the purpose of charging insurance duty, general insurance is divided
into 2 types. Duty is chargeable at the rate of 5% of the premium on type A insurance,
and at 2.5% of the premium on type B insurance. Type B insurance includes crop
insurance and livestock insurance. Type A insurance is all general insurance other
than type B insurance.

The amendments divide general insurance into 3 types, and provide for a levy of 9%
on type A insurance, 5% on type B insurance and 2.5% on type C insurance. Type C
insurance includes crop insurance and livestock insurance. Type B insurance
includes motor vehicle insurance, aviation insurance, disability income insurance,
occupational indemnity insurance and hospital and ancillary health benefits
insurance. Type A insurance is all general insurance other than type B or C insurance.

See Schedule 1 [9]–[12].

The amendments have effect from 1 September 2005. See Schedule 1 [14].

Concessions for vendor duty and land-rich disposal duty
At present, a vendor duty concession applies to a transfer of land-related property if
the dutiable value of the land-related property at the time of transfer does not exceed
the dutiable value of the land-related property at the time of its acquisition by the
vendor by more than 15%. An exemption applies if the increase in dutiable value
does not exceed 12%, and a discount applies if the increase in dutiable value exceeds
12% but not 15%. A similar concession applies to the duty payable on disposals of
interests in land-rich entities.

The amendments make special provision for the application of the concession in
cases where the land or interest disposed of is held subject to a trust. The object of
the amendments is to make it clear that a mere change in the legal ownership of
land-related property or an interest that is held in trust does not necessarily result in
a new acquisition being made for the purpose of the concession.

In the case of a vendor duty transaction, if the vendor acquired the land-related
property concerned by means of a dutiable transaction that was not chargeable with
ad valorem duty, the amendments deem the vendor to have acquired the land-related
property when the last dutiable transaction relating to that land-related property,
being a dutiable transaction that was chargeable with ad valorem duty as a transfer
of the land-related property, occurred. This is to prevent a situation where a new
trustee is appointed to a trust, resulting in a change to the legal ownership of
land-related property, and the acquisition by the trustee of that legal interest is treated
as a new acquisition of the land-related property for the purposes of the vendor duty
concession, even though ad valorem duty may not have been paid on that transfer of
legal ownership. Under the amendments, an ad valorem duty transaction is required
in order to obtain the benefit of the concession. See Schedule 1 [1] and [2].

A similar amendment is made to the corresponding provisions relating to the duty
payable on the disposal of an interest in a land-rich entity. If an interest in a land-rich
entity is acquired on trust, it is the date on which the beneficial owner of the interest
acquired the interest, rather than the date on which the person disposing of the
interest acquired the interest, that is treated as the date on which the person making
the disposal first acquired an interest in the land-rich entity. See Schedule 1 [3].

The amendments also make it clear that, for the purposes of the concession, an
acquisition of land by a linked entity of a land-rich entity is treated as an acquisition
by that land-rich entity. See Schedule 1 [3].

The amendments will have effect as if they had commenced on the date on which the
Bill for the proposed Act was introduced in the Legislative Assembly. See
Schedule 1 [14].

Savings and transitional
Schedule 1 [13] and [14] contain savings and transitional matters.

Schedule 2 Amendment of Land Tax Act 1956 No 27
Schedule 2 re-introduces a tax-free threshold for land tax. The new threshold will be
$330,000 for the 2006 land tax year and will be indexed thereafter. If a land owner’s
aggregate taxable land value is more than $330,000, the land will be taxed at a rate
of $100 plus 1.7 cents for each $1 in excess of the threshold.

Schedule 3 Amendment of Land Tax Management
Act 1956 No 26
Schedule 3 provides for the determination of the tax threshold for land tax in
connection with the amendments made by Schedule 2. It provides for the indexation
of that threshold by the Valuer-General to account for movements in land values, and
for other consequential (including savings and transitional) matters.

Note: If this Bill is not modified, these Explanatory Notes would reflect the Bill as passed in the House. If the Bill has been amended by Committee, these Explanatory Notes may not necessarily reflect the Bill as passed.

 

---

[Index] [Search] [Download] [Bill] [Help]