Legislative Council Fifty-First Parliament, Third Session (51-3) 51 3 Parliament of South Australia Legislative Council published Bills Stamp Duties (Tax Reform) Amendment Bill STAMP DUTIES (TAX REFORM) AMENDMENT BILL Introduction and First Reading Introduction and First Reading Received from the House of Assembly and read a first time. Second Reading Second Reading The Hon. P. HOLLOWAY Legislative Council Minister for Mineral Resources Development, Minister for Urban Development and Planning, Minister for Small Business The Hon. P. HOLLOWAY (Minister for Mineral Resources Development, Minister for Urban Development and Planning, Minister for Small Business) (16:32): I move: That this bill be now read a second time. I seek leave to have the second reading explanation inserted in Hansard without my reading it. Leave granted. Legislative amendments were introduced and passed, as part of the 2005-06 Budget, to phase out rental duty and mortgage duty. Both of these stamp duties will be abolished from 1 July 2009. In the case of rental duty, the termination provisions were drafted on a basis consistent with representations made by the finance industry—namely, to restrict the phase out of stamp duty to new rental contracts so as to avoid the administrative burden of adjusting existing rental contracts each time stamp duty rates were reduced and then abolished. The finance industry has since made representations for the legislation to be amended to enable all rental contracts in existence at 1 July 2009 to obtain the benefit of the abolition of rental duty. Industry revised their position following the receipt of more detailed advice in relation to the application of the Goods and Services Tax (GST) that removed the need to issue GST adjustment notices when stamp duty rates changed. This Bill gives effect to the amendments that have been requested by industry and ensures that no rental duty is payable on rental contracts on or after 1 July 2009. In the case of mortgage duty, amendments have also been included in the Bill to clarify the stamp duty treatment of mortgages entered into both before and after the abolition date of 1 July 2009. A mortgage executed on or after 1 July 2009 will be free from stamp duty. Mortgages executed prior to 1 July 2009 will only be liable for stamp duty where an advance is made under such a mortgage prior to 1 July 2009 and will be chargeable at the rate in force, as at the date that the advance was made. In addition to clarifying the abolition of rental and mortgage duty the opportunity is being taken to extend the concessional stamp duty treatment provided to exploration licences to include geothermal licences. The Stamp Duties Act 1923 provides for concessional stamp duty arrangements for the transfer of exploration licences. However, the current wording of the provisions does not cover transfers of geothermal exploration licences under the Petroleum Act 2000. The opportunity has therefore been taken to update the coverage of exploration licences eligible for concessional stamp duty arrangements under the Stamp Duties Act 1923 to include geothermal exploration licences under the Petroleum Act 2000. A number of minor amendments to the Stamp Duties Act 1923 have also been included such as repealing redundant provisions in relation to cheque duty and lease duty which have not operated for some time. Explanation of Clauses Explanation of Clauses Part 1—Preliminary 1—Short title This clause is formal. 2—Commencement The Act will come into operation on the day of assent. However, clause 13, which amends section 79 of the Stamp Duties Act 1923, will come into operation on 1 July 2009. It is necessary for this amendment to come into operation on the day on which duty ceases to arise in relation to mortgages. 3—Amendment provisions This clause is formal. Part 2—Amendment of Stamp Duties Act 1923 4—Amendment of section 7—Distribution of stamps, commission etc This amendment is consequential on the abolition of duty in respect of cheques and cheque forms. Duty is not chargeable on cheque forms issued, or cheques paid, on or after 1 July 2004. Clause 8 repeals provisions of the Act relating to duty in respect of cheques. This clause amends section 7 by removing a redundant provision referring to the payment of duty in respect of cheque forms and cheques. 5—Amendment of section 16—Duty in force when instrument produced for stamping to apply Section 16 provides that the duty chargeable on an instrument is to be calculated according to the rates in force when the instrument is produced to the Commissioner. This clause makes a consequential amendment to section 16 to make it clear that the section operates subject to the Act. This is because proposed section 104(2), to be inserted by clause 15, provides for a different calculation of duty in certain circumstances. 6—Amendment of section 31B—Interpretation This clause amends the definition of dutiable rental business in section 31B of the Act. This amendment is necessary because section 103 in new Part 4A, which provides for the abolition of various duties (to be inserted by clause 15), is to abolish duty on rental business from 1 July 2009. 7—Insertion of section 31N This clause inserts a new section. 31N—Repeal of Division Section 31N provides for the repeal by proclamation of Part 3 Division 2 of the Act, which relates to duty in respect of rental business. 8—Repeal of Part 3 Division 5 This clause repeals Part 3 Division 5 of the Act. Division 5 deals with duty payable in respect of cheques and cheque forms. The Division is to be repealed because duty is not chargeable on cheque forms issued, or cheques paid, by financial institutions on or after 1 July 2004. 9—Amendment of section 71—Instruments chargeable as conveyances Under section 71(14), if property transferred to a trustee is subsequently transferred back to the transferor, and duty was paid on the first transfer, the Commissioner may refund the duty paid less $10 to the person who paid the duty. Under the provision as amended by this clause, the whole amount of the duty paid will be refundable. 10—Amendment of section 71C—Concessional rates of duty in respect of purchase of first home etc The contents of proposed section 71C(3a) are currently included in a note at the end of subsection (3). Subsection (3a) will replace the note. 11—Amendment of section 71D—Concessional duty to encourage mineral or petroleum exploration activity This clause updates the definition of exploration tenement so that it includes exploration licences granted under the Petroleum Act 2000. 12—Repeal of Part 3 Division 9 Section 75A of the Act provides that no liability to duty arises in relation to leases entered into on or after 1 July 2004. This clause repeals Part 3 Division 9 of the Act, which contains provisions no longer required because they relate to the duty previously payable in respect of leases. 13—Amendment of section 79—Mortgage securing future and contingent liabilities It is necessary to repeal subsections (6) and (7) of section 79 on the date on which mortgages cease to be liable to duty. Subsection (6) prevents the registration of the discharge of a mortgage for an unlimited amount unless the instrument of discharge is endorsed with a certificate stating that the mortgage has been duly stamped. 14—Insertion of section 82A This clause inserts a new section. 82A—Repeal of Division Part 9 Division 10 of the Act contains provisions relevant to the duty payable in respect of mortgages. Section 82A will provide for the repeal by proclamation of Division 10. This is because, under proposed section 104, duty will not be payable in relation to mortgages first executed, or that first affect property in South Australia, on or after 1 July 2009. 15—Insertion of Part 4A This clause inserts new Part 4A. The provisions of this Part have the effect of abolishing various duties. Part 4A—Abolition of various duties Division 1—Abolition of duty on rental business 103—Abolition of duty on rental business (1 July 2009) Section 103 provides that there is to be no duty in relation to amounts received in respect of rental business after 30 June 2009. Rental business is currently dutiable under the provisions of Part 3 Division 2 of the Act. Despite those provisions, registration under Division 2 is not required or to be granted on or after 22 July 2009. The registration of a person who is registered immediately before that date will be taken to have been cancelled. Division 2—Abolition of duty on mortgages 104—Abolition of duty on mortgages (1 July 2009) Section 104 abolishes duty in relation to mortgages first executed, or that first affect property, on or after 1 July 2009. Further, if a mortgage is executed before 1 July 2009, or first affects property in South Australia before that day, but no advance secured under the mortgage is made before that day, no liability to duty will arise. It will also be the case that no liability to duty will arise in relation to an advance on or after 1 July 2009 under a mortgage first executed, or that first affects property in South Australia, before that day. If a dutiable mortgage, bond, debenture, covenant or warrant of attorney is executed before 1 July 2009 but produced to the Commissioner after that day, the duty is to be calculated according to the rates in force when the instrument became liable to duty. 16—Amendment of section 107—Transfer of property to correct error Section 107 of the Act authorises the Commissioner to grant relief from stamp duty in respect of an instrument if the sole purpose of the instrument is to reverse or correct a disposition of property resulting from an error in an earlier instrument. Currently, the amount of duty payable if the Commissioner grants such relief is $10 in addition to the amount (if any) by which the duty that would have been paid on the earlier instrument if it had been correctly made exceeds the amount of duty actually paid on that instrument. This clause removes the reference to $10, so that the duty payable in these circumstances is only the difference (if any) between the correct amount of duty and the amount actually paid. 17—Amendment of Schedule 1—Transitional provisions This clause inserts a new transitional provision connected to the repeal of the provisions of the Act relating to duty on cheques and cheque forms. Despite any other provision of the Act or the Taxation Administration Act 1996, no refund of duty on cheque forms is allowed. 18—Amendment of Schedule 2—Stamp duties and exemptions This clause amends Schedule 2 of the Act by deleting provisions relating to the duty formerly payable in respect of cheques and leases. Schedule 1—Related amendments Part 1—Amendment of Statutes Amendment (Budget 2005) Act 2005 1—Repeal of Part 7 This clause repeals Part 7 of the Statutes Amendment (Budget 2005) Act 2005, which has not yet come into operation. Section 21 of the Budget 2005 Act is to repeal section 81A of the Stamp Duties Act 1923. However, that section was repealed by the Statutes Amendment and Repeal (Taxation Administration) Act 2008. Section 22 of the Budget 2005 Act, which amends the Stamp Duties Act 1923 to abolish duty on mortgages, is to be repealed because the way in which that abolition is achieved is inconsistent with the way in which the abolition of duty on mortgages is to be achieved under provisions to be inserted by the Stamp Duties (Tax Reform) Amendment Act 2009. Debate adjourned on motion of Hon. D.W. Ridgway.