Probate Fees

Adjourned debate on motion of Hon. M.C. Parnell:

That regulations under the Supreme Court Act 1935 in relation to probate fees, made on 4 February 2016 and laid on the table of this council on 9 February 2016, be disallowed.

(Continued from 24 February 2016.)

The Hon. R.I. LUCAS (17:00): There are many aspects of the 2015 state Labor government budget that the Liberal Party and many members of the community either objected to or expressed concern about. A very quick summary of those were the increases in the ESL, for example, what became known as the 'rubble royalty' issue, and the issue of probate fees was raised by my colleague the member for Bragg by way of a press release about the time of the budget. So, there were many issues where concern was expressed about aspects of the budget.

Certainly, we indicated that if there had been a Liberal government at the time many aspects of the Labor budget would not have been incorporated in a Liberal budget. However, at the time, whilst acknowledging all the concerns that had been expressed, the Liberal Party took a decision as a party room in essence to allow the Labor government to have its budget, as appalling as it was.

That was the position that the party room took at that particular time. In recent months, the Law Society and others have raised specific issues in relation to the probate fees regulation. Some have opposed the significant size of the increases, others have expressed concern about the technical but nevertheless important issue about whether, if you have these issues to be levied, they should be levied on the gross amount or on the net amount of an estate.

The Liberal party room took the position that it would be useful for one of the committees of the parliament, the Legislative Review Committee, to take evidence, as they often do on regulations, and they did. They took evidence over a number of weeks from representatives from Treasury, a gentleman who is the Registrar of Probates, and the Law Society gave evidence as well.

I think the Hon. Mr Parnell had wished to bring the debate on this to an early conclusion, but it has been a consistent principle of many in this chamber, including Mr Parnell where on most occasions he has supported that where—

An honourable member interjecting:

The Hon. R.I. LUCAS: No, he has up until recently. He may well still.

An honourable member interjecting:

The Hon. R.I. LUCAS: I make no disparaging comment about the Hon. Mr Parnell at all at this particular time. The point I am making is that he has traditionally supported an important principle that, if there is work to be done by a parliamentary committee, it should do the work. He had advised members that he would like us to vote on this particular issue, but in discussions with him, when I indicated that the committee was taking evidence from those three individuals and bodies, he acknowledged the good sense of seeing what they had to say about the issue and whether that better informed the debate. I think, as he would have seen, it is still unclear some of the detail as to how the government has made its calculations and how it has defended its position.

At least there is more evidence on the public record in terms of what the government did and did not do in relation to coming to this budget decision. At least its defence for this particular position, even if members might not agree with the defence the government had, is on the public record and there is greater detail and clarity about that. I want to thank the Hon. Mr Parnell for, in the interests of democracy, transparency and accountability, allowing the Legislative Review Committee to conclude its work to inform all members and then members can be in a position to make their judgements.

Our party room—and I advised the Hon. Mr Parnell of this—had taken the decision at budget time that, as bad as we thought aspects of the budget were, we were going to abide by the usual convention. There have been occasions when we have varied from that usual position, but last year our party room decided that it would not. We advised, for example, the Local Government Association representatives who wanted us to take action in relation to the rubble royalty issue that we were happy to question the government about it, but that they needed to negotiate something with the government, which subsequently they did to the credit of the Local Government Association and the government, to amend aspects of the rubble royalty decision.

With the Legislative Review Committee having taken the evidence and now been informed by that evidence, our party room has further considered the issue. I can indicate again that, as in the community, there were varying views in relation to what the appropriate course of action might be, but on balance the party room decision was that we would abide by the decision that we took in June of last year; that is, even though we might not have been attracted to various elements of the budget, we would allow the government to have its 2015 budget.

For those reasons, I put on the public record that the Liberal Party's position in voting on this regulation will be consistent with the position we adopted on the Appropriation Bill, but, more particularly, on the budget measures bills in 2015; that is, whilst we expressed lots of concern about them, we did not vote to reject them. Therefore, on this occasion, because the party room saw this as being part of the government's budget package, we will not vote to reject this particular regulation.

In conclusion, having indicated the background to the party room's decision, now that this evidence has been taken I, together with many others I suspect, am much better informed about how this will operate and, through both the Budget and Finance Committee and estimates committees this year and next year, it would be appropriate to monitor and to further inform the parliament about how this particular new fee has been implemented and whether or not the best guess estimates—that is the only way I can put it—that Treasury and the government have come up with in relation to what might be recouped by this measure will prove to be accurate. Certainly from my viewpoint, and I am sure that of others, we will continue to monitor this issue.

The Hon. G.A. KANDELAARS (17:08): I rise to provide the government's response to this motion. The introduction of the tiered fee structure for probate fees based on gross value of deceased estates was a 2015-16 budget measure. The measure had regard to tiered fee structures in other jurisdictions and was considered an efficient method to administer and comply with.

The introduction of the tiered fee structure for probate fees based on gross value of deceased estates was expected to commence on 1 January 2016. The fees were gazetted on 4 February 2016 and commenced on 28 February 2016. The tiered structures used in other jurisdictions, including New South Wales, Victoria, Tasmania and the ACT, are based on a gross value of estates.

One of the main reasons for basing a tiered structure on gross value is that it is relatively easy to administer and to comply with requirements. There could be a significant complexity in administering a tiered structure determined on a net value. Depending on how that value is calculated, it could be very challenging for an estate to provide sufficient evidence to support a claim. For example, net values would need to be defined in the context of personal and secured liabilities, fees associated with administering the estate, etc.

The probate office would require additional resources not only to implement the tiered structure for probate fees based on net value of a deceased's estate but also to investigate and verify the value and inclusion of all assets and liabilities disclosed for the purpose of calculating the fee before the probate application can be examined. It should be noted that errors were relatively common in disclosures under the previous flat fee structure. This will lead to delays in granting of probate.

There is also a potential for evasion, for example, by modest estimations of value or related-party loans that are asserted and then forgiven after probate is granted. The Law Society of South Australia has raised specific concerns around probate lodgement fees under the tiered fee structure for estates valued at more than $500,000 with significant mortgages and for farmers who personally own their properties with significant liabilities attached.

Generally, more than half the estates in South Australia are valued at less than $500,000 on a gross basis and so will not fall into the higher tiers and not all farmers will fall into the highest tiers. For example, the older farmer may transfer the family farm to another family member prior to death, a transaction that is exempt from stamp duty under the Stamp Duties Act 1923. The tiered fee structure is considered an equitable approach that recognises the capacity of an estate to pay.

The previous flat fee of $1,114 was reduced to $750 for estates valued at less than $200,000, with a saving of $364 for many estates in South Australia. In addition, under South Australia's tiered structure, the fee of $1,500 based on a median house price in Adelaide of around $430,000 is comparable to the fee of $1,460 based on the median house price in Sydney of around $890,000.

The tiers are as follows: from $0 to $200,000, the new fee is $750 where the old fee is $1,114, a decrease of $364; from $200,000 to $500,000, the new fee is $1,500 where the existing fee is $1,114, an increase of $386; from $500,000 to $1 million, the fee proposed is $2,000 while again the existing fee is $1,114, an increase of $886; and for estates in excess of $1 million, the proposed fee is $3,000 while the existing fee is $1,114, an increase of $1,886. I indicate that the government opposes the disallowance motion.

The Hon. J.A. DARLEY (17:14): I rise in support of this motion. At a recent Legislative Review Committee meeting, the Courts Administration Authority was asked about these changes to the probate fees. Representatives indicated that the current fees amounted to approximately $6 million per annum, that these already more than cover the cost of administering probate and that they were already providing revenue to Treasury. Further to this, we were advised that these changes in the fees were not made at their request and were, in fact, an idea put forward by Treasury.

The method by which the new fees are calculated is flawed, as it uses the gross value of the estate rather than the net value. This could mean that the estate of a person living in a property that is worth $1 million will pay probate fees based on $1 million even though the mortgage for the property could still be $900,000. The actual net value in this case would be $100,000; however, fees would be paid on $1 million. This is wrong. In addition, there would be additional costs incurred due to the fact that solicitors lodging applications for probate will need to have certified valuations of all the assets.

There seems to be no justification for changing the fees, especially given the flawed methodology which is used to calculate them. It looks like it is just another greedy money grab by the government that is looking every which way to find more revenue. This is a sneaky way to boost the Treasury coffers, and it is hitting people when they are mourning the death of a loved one. I support the Hon. Mark Parnell's motion of disallowance.

The Hon. M.C. PARNELL (17:16): I understand there are no further speakers, so I would like to thank the Hon. Rob Lucas, the Hon. Gerry Kandelaars and the Hon. John Darley for their contributions, and I particularly thank the Hon. John Darley for his support for the motion.

It will be no surprise that I am disappointed that we do not have the numbers today, and I would just like to very briefly reflect on the contributions from the Liberal and Labor parties. I appreciate that the Hon. Rob Lucas, as part of the Liberal Party, has explored this matter in their party room. I was not privy to those discussions, but I expect that they were robust, particularly in relation to the issue of whether or not budget measures are sacrosanct and ought to be treated differently from other pieces of legislation.

It is probably fair to say that possibly a different set of criteria applies when considering budget measures, but they are by no means sacrosanct. I think part of our responsibility in this chamber is that if we see measures that are unfair, or could be made more fair, then I think we have a responsibility to call those out and urge the government to revisit those decisions. Certainly, the Liberal Party had no compunction in disallowing the car park tax. That was certainly a budget measure, so I do not fully understand why this particular measure is treated differently.

I certainly made it clear to the Treasurer in my discussions with him that it was not my intention to attack the increase in revenue proposed by the budget measure. My problem was with the fairness of how it was calculated. I offered to work with the government, and would support a measure that raised the same amount of money but did so in a fairer way, so I was in no way seeking to reduce the revenue base of the state. I believed and still do believe that this measure is unfair and could have been made fairer, and disallowing these regulations was the government's opportunity to do that.

The Hon. Gerry Kandelaars raised a couple of issues. I do not mean to address them all in great detail, but I will reply to two issues; one was the complexity of using a net valuation rather than a gross valuation. I do not accept that argument, that it does make it more complex. Certainly, the information about assets and liabilities is already provided by executors to the probate office when the application for a grant of probate is lodged. That information is already there; it does not require a great deal more effort to calculate a net figure as a gross figure.

The honourable member referred to the potential for fee evasion. I think that is a straw man argument and that it certainly would be fixable using appropriate practice directions or other guidelines in relation to how documents are to be prepared and distinguishing, for example, between secured and unsecured liabilities. I do not think that it was irredeemable.

The new probate fees have been in operation for about two months now, and this has resulted in a change in the way lodgements are being made in the probate office. For example, I understand that the executors of large estates have been holding off lodging applications for grant of probate because, if the disallowance motion were successful, they would be looking at a saving of about $2,000. I do not know if it is a large number, but there are a number of applications for probate that have been held off which, presumably, will now be lodged, and they will be lodged under the new fees. Those people will now be paying $2,000 more than they were hoping to.

On the other hand, small estates have been lodged for grants of probate because it is now cheaper for those people, and they are saving pushing $400. The small estate applications are being lodged, the big ones are being held off, and part of the reason I called for this motion to come to a vote as early as I did was that we had the opportunity to disallow these regulations within a few days of their coming into effect. That was what I was trying to achieve, the lack of certainty that exists in the legal profession.

I appreciate the Hon. Rob Lucas's kind words about my holding off until the Legislative Review Committee had considered its work. I was also encouraged by the fact that, had I not held off, the result would have been a foregone conclusion—a vote of no. Holding out for the hope of a yes vote is an additional factor to the lofty democratic principles I subscribe to and to which the Hon. Rob Lucas attributed my main motivation, for which I thank him.

I am disappointed that we are not going to be disallowing these regulations. I still urge the government, at the next budget cycle when they are looking at ways of raising revenue, to have regard to the concerns that have been raised by the Law Society and have a look at whether we can make this fairer because I believe there will be unintended consequences. Because the numbers on the floor are clear, I will not be dividing on this matter; it is clear what the result would be. I thank honourable members for the attention they have given this motion.

Motion negatived.