Legislative Council Fifty-First Parliament, Second Session (51-2) 51 2 Parliament of South Australia Legislative Council published Bills Pay-Roll Tax (Harmonisation Project) Amendment Bill PAY-ROLL TAX (HARMONISATION PROJECT) AMENDMENT BILL Committee Stage Committee Stage In committee. Clause 1. The Hon. R.I. LUCAS Legislative Council The Hon. R.I. LUCAS: I thank the minister for the answers to the questions I posed; they resolve, clarify or answer most of the questions I raised. Having clarified the RevenueSA advice as to what the various provisions of the legislation cost, I do note that, where there has been a cost to state revenue of the changes, there is a specific estimate from RevenueSA or Treasury (I suspect probably Treasury), but where there are increased costs to businesses (that is, a revenue inflow to Treasury) it states that it is not possible to indicate what the revenue impact will be. For example, I cite the question I raised in relation to superannuation contributions from non-employee directors, which clearly will mean that some businesses will have to pay additional payroll tax they do not pay at the moment. That is an example of where there will be a benefit to the Treasury of some amount of money. In those cases, Treasury is unable to give an estimate as to what the benefit to the Treasury or the cost to businesses will be. But in the other areas, for example, the grouping changes, where the changes will mean that businesses benefit and the state Treasury and the budget has a loss, there are quite specific estimates of $2.8 million this year and $3.2 million, etc. I accept that, in some cases, it may well be difficult to estimate, but the reality is that, even with the changes where it is talking about a cost, it is very difficult for Treasury to estimate those as well. No-one is assuming that they are precise and accurate descriptions of exactly what will happen, because the vagaries of tax collection, businesses and the economy will mean that they can at best be estimates. I guess the only point I am making is that, when there is a downside to the budget, there is an estimate, but when there is an upside to the budget, there is no estimate at all. I do concede, however, that, given the balance of the changes here, there would be a net cost to the state budget as a result of these changes; that is, I do accept the general flavour of the advice that has been given that, generally, this harmonisation in the first stage is a total net cost to the state budget and therefore a total net benefit to businesses, even bearing in mind my marginal comment in relation to the inability to estimate where there has been a benefit to the budget. Clause passed. Clauses 2 to 6 passed. Clause 7. The Hon. R.I. LUCAS Legislative Council The Hon. R.I. LUCAS: This clause covers a number of issues. On my reading, it includes the issue that I have referred to as the grouping changes, which has always been a vexed issue in relation to payroll tax collections; that is, it is sensibly designed to try to ensure that companies cannot divide their business up into a squillion parts and get them all underneath the payroll tax threshold which, even with the recent changes, I think is still the lowest tax threshold in the nation. It is sensible to try to prevent that avoidance. But, clearly, the dilemma is that, naturally, there are some companies that, for sensible reasons, have been developed separately by the same person or people and they are grouped together. That is always the argument about whether it has been an avoidance measure or whether it is just sensible, and these are the rules that try to resolve those issues. The change in relation to this is that it essentially came down to what the common control test threshold was going to be. What on the surface appears to be a minor change does have a reasonably significant cost to the taxpayers. In his response, the minister said: The main reason for the revenue cost in the grouping division is that the common control test threshold will now be more than 50 per cent, where previously it was 50 per cent or more. As I have said, what on the surface looks to be quite minor essentially means that the threshold will now be that you have to be more than 50 per cent to be grouped and therefore caught under these provisions. If you are right on 50 per cent, you will not be caught under these provisions, whereas previously you would have been. The estimates of the cost to revenue are about $3 million a year (a bit under and then a bit over) for the next three years. Can the minister advise whether we were the only state that had the threshold at 50 per cent or more, or were there a number of states that had that provision? The Hon. P. HOLLOWAY Legislative Council The Hon. P. HOLLOWAY: My advice is that Victoria and Queensland also had the 50 per cent or more. The Hon. R.I. LUCAS Legislative Council The Hon. R.I. LUCAS: If three states had 50 per cent or more—and I assume three states had more than 50 per cent—what was the process of the government's agreement to moving to the other three states' provision rather than the provision that exists here in South Australia? The Hon. P. HOLLOWAY Legislative Council The Hon. P. HOLLOWAY: My advice is that the decision was the result of extensive consultation between the jurisdictions, but in the end the decision was made on the basis that more than 50 per cent would be the threshold, because 50 per cent is where actual control of the company entity is exercised. The Hon. R.I. Lucas interjecting: The Hon. P. HOLLOWAY Legislative Council The Hon. P. HOLLOWAY: Yes; more than 50 per cent. More than 50 per cent is where the actual control is exercised. The Hon. R.I. LUCAS Legislative Council The Hon. R.I. LUCAS: Given the estimates that have been made, what estimates has RevenueSA made of the number of businesses that will be impacted on by this change? The Hon. P. HOLLOWAY Legislative Council The Hon. P. HOLLOWAY: My advice is that a broad estimate has been made based on the Victorian experience, and that is that approximately 15 per cent of those broadly controlled companies would be affected by this provision. The Hon. R.I. LUCAS Legislative Council The Hon. R.I. LUCAS: Fifty per cent of all companies? The Hon. P. HOLLOWAY Legislative Council The Hon. P. HOLLOWAY: Fifteen per cent of those commonly controlled companies would be affected based on the Victorian experience. The Hon. R.I. LUCAS Legislative Council The Hon. R.I. LUCAS: Can I just clarify then that, given that this 15 per cent of commonly controlled companies on estimate will receive a benefit, what is the process from here? Assuming the legislation passes today and is then proclaimed, do these provisions then operate from 1 July of this year in relation to payroll tax calculations for the financial year 2008-09? The Hon. P. HOLLOWAY Legislative Council The Hon. P. HOLLOWAY: My advice is that this will come into effect on 1 July, and the expectation is that we can rely on most companies to advise the commissioner that they are impacted on by this measure. Clause passed. Remaining clauses (8 to 11) and title passed. Bill reported without amendment. Third Reading Third Reading Bill read a third time and passed.