Statutes Amendment (Budget 2016) Bill

Second Reading

Adjourned debate on second reading.

(Continued from 20 September 2016.)

The Hon. R.I. LUCAS (17:23): I rise on behalf of Liberal members to speak to the Statutes Amendment (Budget 2016) Bill. As outlined in the earlier debate on the companion bill, the Appropriation Bill, the budget each year generally has two pieces of legislation. This particular budget bill or 'budget measures bill', as it has been referred to in the past, in essence, has the details of the budget changes. The appropriation allocates the overall expenditure that the government of the state requires to deliver the public services for the coming 12-month period.

The Liberal Party's position in relation to the budget in general has been put by myself and my colleagues in the Appropriation Bill debate, and I will not repeat that general premise, other than to summarise briefly and say that this is not a budget that a Liberal government would have brought down, this is not a good budget in the view of the Liberal Party, and certainly this is not a budget that we believe addresses the major problems that confront the state, as again evidenced by today's very sad unemployment figures.

No matter how you wish to polish or spin the figures, it is quite clear that when we remain in South Australia the state with the equal highest unemployment rate in the nation, a sad leading of the poll which we regain with Tasmania and which we have held for many months, it is sad and disappointing for the many tens of thousands of South Australians, their families and their friends who are unemployed currently, sadly under a government that has run out of steam and lost interest over a 14 or 15-year period.

Those many tens of thousands of South Australians frankly have no hope. The only hope on the horizon for them is that there might be a change in March 2018 and, at least, a leader and a government prepared to tackle the fundamental economic problems and issues that confront the state, rather than being distracted as this Premier, this government and these ministers have been for most of the last 15 years in tackling—irrelevant is too strong a word—issues that are not part of trying to resolve the economic problems that confront the state.

The time and energy the Premier and other ministers are devoting at the moment to issues such as voluntary euthanasia and others in another place are testament to that fact. A crisis confronts us, and this budget will not assist us in tackling that economic and financial crisis that confronts the state.

The Liberal Party's general position in relation to budget and budget measures has been that, even though we might oppose some of the provisions in the budget bills, by and large the Liberal Party has allowed those measures to pass. The most prominent exception to that rule was when the Liberal Party campaigned on the issue of the car park tax in the period leading up to 2014.

In my time I think that is the most prominent example where the Liberal Party has not observed the convention and did so on the basis that it had been a clear policy difference between the major parties leading into 2014. I will not repeat the arguments for and against that, other than to say that, with that most prominent exception, the Liberal Party has generally observed the convention that, even though we might not like particular provisions in the budget, by and large we have allowed the government of the day to be judged on those decisions they have included in the budget.

I note that the Hon. Mr Brokenshire this afternoon did indicate his very strong support for the conventions of the parliament, in particular the Legislative Council, in an earlier debate, and I can only indicate that I agree with the comments that the Hon. Mr Brokenshire made in relation to those conventions.

With that position, whilst we will ask a significant number of questions, we will seek to highlight some concerns with various provisions in the budget bill but, ultimately, the Liberal Party's position will be that we will not be either opposing or seeking to amend the provisions in the Statutes Amendment (Budget 2016) Bill.

This particular bill includes a significant number of revenue measures, but the biggest ones that have attracted the most publicity have been the wagering tax, the waste levy, the taxi levy and the increase in school fees. Over the forward estimates period, they raise approximately $135 million a year extra from long-suffering South Australian families and businesses.

The first area I will address is the issue of school fees. The government has introduced school fees for dependents of Temporary Work (Skilled) visa 457 holders. The government's argument is that this will bring South Australia into line with other jurisdictions. There has been concern expressed about this proposal from some regional communities in particular, which have large numbers of families with 457 visas—for example, Murray Bridge and Bordertown.

In the briefing I had with government officers, I asked a series of questions, and I will put those same questions on the record here and seek a commitment from the government to provide the answers that they previously provided to me as part of the government's official response to those questions on the public record. The questions I put in relation to the school fees proposal were whether the government can provide further details on the fee structure that is to be proposed as part of the record, and whether the government would respond to the concerns that have been expressed from some of those regional communities, in particular, Bordertown and Murray Bridge.

The government has provided some detail on the concerns that the Bordertown community expressed in relation to this proposal and the detail of the government's response and also the government's view that, by and large, since they provided that response, there have been no further concerns expressed from representatives of the Bordertown community. I asked a similar question in relation to Murray Bridge where there is a very large abattoir with significant use of 457 visas, and whether or not there has been concern expressed by that community about this proposal and what the response has been.

I also asked the government to provide some detail on the breakdown of 457 visas between the public and private sectors and, in particular, in relation to the government's use of 457 visas, and which government departments and agencies. The government has provided some information in relation to state government generally, but I am wondering whether the government has any more detailed information in particular in relation to SA Health or health bodies' use of 457 visas, and whether the government was prepared to put that response on the public record as well.

The second revenue issue is in relation to the waste levy. The metropolitan solid waste levy is going to be increased progressively from $62 to $103 in 2019-20. I put a series of questions to the government officers and asked for their responses to be put on the record. Those questions were: what is the potential for disallowing the EPA regulation to increase the waste levy, and what would be the impact on the organisation if that was to occur? Will GISA (Green Industries South Australia) be subject to the same transparency of reporting as Zero Waste SA? Will GISA be subject to the Public Finance and Audit Act, the FOI Act and the Public Sector Management Act? Will GISA be covered by the Public Corporations Act, and how does that compare with Zero Waste SA? Will the government respond to the question as to who will have the final say over the climate change funding, which the funding is in part to be used for?

I also asked the question: if the board has a different opinion as to whether the disaster, climate change or other funding should be allocated, can the minister override or direct the board as to what the government's answer is to that question? Finally, what is covered in the disaster waste management criterion? For example, would expenditure on the Pinery fire qualify? I asked for the government's response to that. This has occurred since my briefing with government officers. Would flooding, for example, that has been experienced recently, come within the purview of disaster waste management, and can expenditure be incurred out of the waste levy as will be constructed under the proposed government changes?

The third area is the taxi levy. From October, there was meant to have been a $1 levy on all metropolitan trips for taxis, chauffeur vehicles and new entrants, such as UberX. There was also to be an extra $2 fee for peak periods on weekends. The revenue, in part, was to be used to fund the $30,000 compensation payment per taxi licence, and a $50 per week compensation payment to licence lessees for up to 11 months, and there was also to have been a freeze on the release of taxi licences for at least five years.

My questions there are: firstly, had the revenue from possible new taxi licences been included in the forward estimates previously and have they had to be taken out of the forward estimates as a result of this policy decision? What are the total estimated collections from these levies over the 10-year period?

The reason I use the 10-year period rather than the forward estimates is that Uber has made a claim publicly, which they say is based on advice from the government, that this is an $80 million tax over 10 years, which averages out to $8 million a year. So, I asked for the government's indication on whether it is correct that government officers provided that information to Uber, and if not, what is the government's estimate of the levy collections over the 10-year time frame to which Uber has referred?

In the briefing I had with government officers, the advice I received for the forward estimates period was that the taxi levy would collect $0.1 million in 2016-17, $2.2 million in 2017-18, $4.7 million in 2018-19 and $4.8 million in 2019-20. It looked to be stabilising at a level of just under $5 million a year. It is hard to contemplate, unless there is a ratcheting up in the subsequent six-year period, how this $80 million figure over 10 years is being constructed. I certainly seek detail from the government as to, firstly, the accuracy of the figures given to me for the forward estimates period, but then secondly, the forward estimates over the 10-year period, and the accuracy of the $80 million claim that Uber has been making.

On the basis of the $80 million claim, I seek advice as to the level of expenditure in terms of compensation that is to be paid; that is, there is a $30,000 compensation payment per taxi licence. So, my first question is: how many taxi licences are there? The government did indicate that there were 1,035 taxi plates eligible for the $30,000 compensation. On that basis, the total compensation there would be of the order of $30 million, I would assume, which is a long way short of the $80  million.

The second issue of the compensation is: how many $50 per week payments might be made? The government's response to that to me was there are 934 leases eligible for the $50 per week payment compensation. When you add those two together, it is certainly significantly less than total collections of $80 million over the 10-year period for example.

When I asked the question at the briefing: what is the additional money to be spent on? I got a non-specific response, at that stage, and that is that the minister would consider a range of options. So, I put a specific question to the government: firstly, if there are additional moneys—and this is a levy which is to continue, at this stage anyway, for an ongoing period although I think there is one member in this house who might be looking to time limit or put a sunset clause on the collections—but assuming it is unlimited, that is, it continues, then once the total compensation level of just over $30 million has been paid out, what are the guidelines for the expenditure of the taxi levy funds? During the committee stage, if we do not get a detailed response to the second reading, we will be seeking some detail about how that is to be expended.

To that end, I did ask the question: how much will the $1 levy raise? The answer I got was that, in a full year, the $1 levy is estimated to raise $8 million per annum. That is why I am not clear as to why the number I was given for the full year of 2018-19 was $4.7 million. Sorry, Mr Acting President; I stand corrected on that. The table to which I have been referring has superimposed the two figures, taxi levies and school fees.

If I can correct the record, when I referred earlier to the collections for the taxi levy being $0.1 million in 2016-17; in 2017-18, $2.2 million; in 2018-19, $4.7 million; and in 2019-20, $4.8 million, I stand corrected. The table has been superimposed. That refers actually to the collections for school fees. The taxi levy collections the government officers gave me were $6 million in 2016-17, $8 million in 2017-18, $8 million in 2018-19 and 2019-20 is $8 million. That, in essence, answers the questions that I was just putting as to where the $80 million comes from, so I stand corrected on that. When I was referring to the school fees earlier, the collections for those were those numbers ratcheting up to an estimated $4.8 million in 2019-20.

Nevertheless, the question then remains, if it is to be $80 million over 10 years, and if the total compensation is $30 million or a bit above that, as to where the remaining funds are to be spent and what the guidelines will be for that. I also asked in relation to that particular area of the budget whether the government could put a justification for the maximum non-cash surcharge of 5 per cent. The government has provided a detailed response to me on that, and I ask for that to be placed on the public record as well.

The fourth new revenue area is the issue of the wagering tax. A new wagering tax from 1 July 2017 will be introduced at 15 per cent of net wagering revenue from persons located in South Australia by all Australian-based operators. The tax will apply to bets on racing, sports and other events, such as the Academy Awards. South Australia will be the first jurisdiction to introduce a wagering tax based on the place of consumption.

We have been advised that, last year, South Australia prepared a report for all treasurers on such a tax for the national meeting of all state premiers and treasurers, as I understand it. We have been advised from interstate sources that, while South Australia prepared the report, there was little or no appetite for proceeding with this new wagering tax from most other jurisdictions, and it was not pursued by the other jurisdictions.

There is certainly an argument, and one that I have some sympathy for, that this is a very complicated area and that if the nation was intent on imposing a new wagering tax on online corporate bookmakers, it would be sensible to try to do that as a nationally agreed initiative. I think there are many others in other jurisdictions who agree with that particular view. SACOSS has disagreed with that. They support the South Australian government's view that we should proceed independently of other jurisdictions if required to do so.

The government's argument has been that betting companies such as Sportsbet, CrownBet and Bet365 are licensed in the Northern Territory and do not currently pay wagering taxes in South Australia. The betting companies are obviously strongly opposed to the new tax, and have indicated that they will continue a campaign against it. They are clearly concerned that if the tax is established in South Australia then there is a possibility that it might be introduced in other states as well.

The betting companies indicate that there are more than 50 illegal offshore betting companies operating in Australia—some of those, such as Pinnacle, might be well known to those familiar with sports betting companies—and the estimates are that those illegal offshore betting companies take more than $500 million per year from Australian punters. Of course, part of the sports betting companies' argument is that legislation such as the South Australian legislation will have no impact on illegal offshore betting companies and, in fact, might drive more punters to use illegal offshore betting companies if they are seen to offer better odds for the same bet because of not having to pay South Australian or Australian-based tax arrangements.

I must admit that I was surprised when Sportsbet indicated to me that they had 130,000 customers in South Australia. However since that time, when I had some discussion with my colleagues, I guess I have become aware that there are many more people in and around these environs who either have Sportsbet accounts themselves or know that members of their family or immediate friends have Sportsbet accounts, not that they all necessarily use them to any great extent.

However the 130,000 figure, a significant figure for a state with a population the size of South Australia's, is an indication of something I mentioned yesterday: that, sadly, I think many people do not understand that the make-up of gambling challenges now and in the future is going to be increasingly in this area of online sports betting. Some of these you can seek to control because they are stationed in your state or your nation, but many you cannot control because they are stationed illegally offshore, and it is beyond your capacity to control customers' access to those services.

Sportsbet indicates that it pays $75 million each year in product fees to racing and sporting bodies for the rights to offer wagering services. They argue that there is no other jurisdiction in the world which requires betting companies to pay both significant product fees and a point of consumption wagering tax. CrownBet has claimed that all interstate wagering operators pay $27 million annually in product fees to the South Australian racing industry.

When I sought a response from Thoroughbred Racing SA (TRSA) regarding their position on the tax, they indicated they were not in a position to advise the opposition what their position was, that they were still to consider their position as a board. I have still not heard from Thoroughbred Racing as to whether they eventually made up their minds regarding supporting or not supporting the wagering tax provisions.

I think it is a fair indication, as there has been no contact from them to members, no public statement, that they are certainly not taking a public profile at all in relation to the wagering tax. The relationship of that position, and the fact that there is a negotiation going on with Thoroughbred Racing and the South Australian government with the UBET monopoly agreement is an interesting question, which perhaps I and others might explore on another occasion.

The sports betting companies have campaigned against it. There was paid advertising and an email campaign to their existing customer base. Sportsbet indicated that, sadly, it is not going to proceed with its proposal for a $20 million data management centre to be located in Adelaide as a result of the government's legislation. There clearly would have been a number of jobs potentially as a result of that data management centre being located in South Australia, but that is not going to proceed.

The bottom line is that the sports betting companies have said, 'Look, there might be a number of responses. We may well reduce the odds that we offer South Australian customers or we might not offer betting options to South Australian customers.' None of that, of course, has occurred yet because the legislation has not been introduced. However, ultimately, there may well be that sort of response from the sports betting companies and I think it will only be at that stage that punters might become aware of the true impact of what the government has done in the legislation.

What I seek from the government is whether there is any more detail in relation to the negotiations the government has had with other jurisdictions. Are any other jurisdictions now actively considering the introduction of similar legislation or a wagering tax in their jurisdictions? What, if any, has been the result of any negotiation or discussion with the sports betting companies in relation to the detail of this?

Certainly some of the companies raised the question that, if the government was proceeding with this, there were questions about some of the details that they felt ought to be changed. We said to them, 'You need to have that negotiation or discussion with the government and with Treasury.' My question is: have there been requests for changes in the detail and, if there have, what has been the government's response to requests in the change of detail for the implementation of the wagering tax, if it proceeds?

The next area concerned amendments to the Land Tax Act. I asked the government to provide examples of a sporting club exemption, and I ask whether their response could be placed on the record. I asked for a breakdown of eligible sporting associations and, again, I ask whether the government will place on the record the government's response to the questions. Also I asked for an example of charity exemption and how that might operate. The government provided me with a hypothetical response and I ask whether that answer could be placed on the public record as well.

I also asked some questions in relation to the amendments to the Mining Act, the Petroleum and Geothermal Energy Act and whether the government could outline in some detail the new administrative process. Again I ask whether the government will place on the public record its response to those particular questions.

Finally, as I did last year, I sent a copy of the government's budget bill to one of the most prominent tax lawyers in South Australia and asked for his detailed response and comments. He did so last year in a 20-page response which I read onto the public record. I have a nine-page response this year, so it is only half as long, which I intend to again read into the record. I indicate that, as a result of the 20-page submission made by this tax lawyer through the opposition last year, credit goes to RevenueSA and the government as they did take on board some of the suggestions, and the government introduced some amendments as a result of the considered views of this particular tax lawyer.

I think the government is well aware of the identity of the tax lawyer and is prepared to place some weight on his and his colleagues' legal opinion about some of these issues. As I said, credit to the government for taking this on board and amending some of the provisions. I therefore read into the record now this nine-page submission, and seek the government's response to the particular concerns, claims and comments made by this tax lawyer. For the benefit of Hansard, I have a copy of the nine-page submission and it is done sequentially. The first topic is land tax amendments. In relation to clause 65(1), he states:

1. The amendment to add to some of the exemptions in section 4(1) of the Land Tax Act 1936 (SA) (LTA) 'on behalf of a trust' appears to arise out of a recent technical view that the exemption in section 4(1)(j) was not available to a trustee that was a proprietary limited company which had not adopted a constitution that specifically limited the purpose to non profit activities. This view was taken notwithstanding that the company was acting as trustee of a charitable trust. On this occasion the interpretation adopted appears to be a form over substance approach was taken.

2. The amendment is required to correct that view and is to be commended. Notwithstanding that it appears to be too narrow from a number of perspectives. They are described in the succeeding paragraphs.

Association

3. The expression association is used extensively throughout the exemptions in section 4 of the LTA. There is no definition of association in the LTA. The Butterworths Australian Legal Dictionary includes the following definition:

Any group of persons who have agreed to join together in pursuit of one or more common objects or purposes: Smith v Anderson (1880) 15 Ch D 247. 'Association' traditionally refers to voluntary non-profit organisations promoting religious, educational, literary, scientific, artistic and other similar purposes, involving benefits to the general community as well as to association members: (SA) Associations Incorporation Act 1985 s 18(1). The term also includes companies, partnerships, and business associations, but excludes building societies, cooperatives, credit unions, and friendly societies.

4. As that definition emphasises, the word is traditionally associated with voluntary non-profit organisations. So whilst the term does include a company it may not include all forms of bodies corporate. It will not include a sole trustee holding property on behalf of an unincorporated association, if a form over substance approach is again adopted.

5. A simple example of that is where an unincorporated association is established for one of the purposes or objects covered by an exemption in section 4 of the LTA. Initially three trustees hold property of the association. Over time two die and are not immediately replaced. On one or more 30 Junes that remains the situation. On a technical view the land is not then owned by the association, the sole trustee owns it. The exemption is therefore not available.

6. It is therefore suggested that the concept of an association, at law, even if acting as a trustee, it is still too narrow, particularly if a form over substance view is adopted again.

Limited Scope of Amendments

7. When the Bill was first introduced in the House of Assembly it was only proposed to add the trust qualification to section 4(1)(j) of the LTA. Namely, the exemption for an association that is established for a charitable, educational, benevolent, religious or philanthropic purpose.

8. By amendments made in the committee stages in the House of Assembly the trust qualification was also added to the exemptions for associations established for the purposes of playing cricket, football, tennis, golf or bowling or other athletic sports or exercises or for horse racing, trotting, dog racing, motor racing or other similar contests. However, it was not added to a number of other exemptions in section 4 where an association has that has a single person or a proprietary company as trustee.

9. Further the insertion of the qualification in some exemptions and not in others is likely to provide further support for a technical interpretation as the principle of construction known as expression unius est exclusio alterius is likely to apply. Accordingly, in attempting to remedy the situation for some bodies, there is a real risk of making it much more difficult for bodies to benefit from the other exemptions in the future. This should be avoided.

10. On this view, land of an association that is held by a trustee for the purpose of supplying to necessitous or helpless persons living accommodation, food, clothing, medical treatment, nursing, pre-maternity or maternity care, or other help within the scope of section 4(1)(d) is unlikely to be exempt. This could be a very harsh outcome for some bodies when the original purpose was simply to ameliorate the problem a more limited class of bodies had encountered.

Suggested Change

11. It is therefore suggested to address these concerns, rather than inserting in the three provisions (sections 4(1)(j), 4(1)(k)(i) and 4(1)(k)(ii)) the words 'on behalf of a trust', that a definition of association be inserted in the LTA along the following lines:

Association includes:

(i) any two or more persons whether corporate or unincorporate; and

(ii) any person or persons whether corporate or unincorporated holding property on trust.

12. The result is that the relief will be uniformly available to land held by an association as trustee for the following purposes:

12.1 supplying to necessitous or helpless persons of living accommodation, food, clothing, medical treatment, nursing, pre-maternity or maternity care, or other help;

12.2 one that receives an annual grant or subsidy from money voted by Parliament;

12.3 the conservation of native fauna and flora;

12.4 conducting an educational institution otherwise than for pecuniary profit;

12.5 a charitable, educational, benevolent, religious or philanthropic purpose;

12.6 playing cricket, football, tennis, golf or bowling or other athletic sports or exercises;

12.7 horse racing, trotting, dog racing, motor racing or other similar contests;

12.8 for former members of the armed forces or of dependants of former members of the armed forces that holds the land for the social or recreational purposes of its members;

12.9 employers or employees, registered under a law of the Commonwealth or of the State relating to industrial conciliation and arbitration that occupies the land for the purposes of the association;

12.10 the recreation of the local community;

12.11 agricultural shows, and exhibitions of a similar nature;

12.12 preserving buildings or objects of historical value on the land; and

12.13 of a prescribed kind.

Clause 65(2)

13. The new provisions to replace 4(1)(k)(i) and 4(1)(k)(ii) appear to have two substantive effects:

13.1 They limit the exemption to bodies wholly or mainly established for the specified purposes; and

13.2 Exclude the relief from land tax if the land is vacant land or land used for residential purposes.

14. In respect of the first, if the local football club or bowls club in a country town is as much a social club as a football club, it will fail the new test. Its activities will cease to be mainly a bowls club, even if there is no other social facility in the town.

15. The exclusion for vacant land may also impact adversely on the poorest or simplest of cricket and other sporting clubs that have the most basic of facilities. A cricket club with nothing more than vacant land where the pitch is prepared for the summer season will cease to be exempt. The same will apply to other sports that require minimal improvements on the land to be used for the sporting activity. It does raise the question as to whether a set of goal posts at either of an oval end causes the land to be other than vacant land. The need for this exclusion is not particularly obvious.

16. The exclusion for vacant land may also overturn aspects of the decision in RSAYS Ltd v Commissioner of State Taxation in which the land in question was underwater but was a marina. If the marina is solely a floating marina moored to adjoining land, then the land below it may constitute vacant land and the exemption lost.

17. The proposed amendment will also deny relief to an association or newly formed associations holding land for development and use of their association but as yet undeveloped. This appears to be harsh and creates a particular impediment for new clubs establishing themselves.

Clause 66

Proposed section 5(10)(ac)

18. The proposed section 5(10)(ac) is to provide relief where a building on the land is being renovated or rebuilt. Should it also provide relief where the buildings on the land are being wholly demolished and wholly new buildings are being constructed on the land? The concept of rebuilding can bring with it a connotation of a continuity of the existing buildings rather than something altogether new or different or significantly enlarged or changed.

19. Should the word 'repairs' also be included?

Proposed section 5(10)(ad)

20. Should the word 'repairs' also be included?

Proposed section 5(10a)

21. Please see the comments above in paragraphs 18 to 20.

Stamp Duties Act

Clause 90

22. This may still not limit the application of section 67 where the land is conveyed to one person but by different persons if the reason for the conveyances to that same person arises from, say, a series of assignments of contracts. They may then, on one possible interpretation, not be regard as a series of separate conveyances because they are tied together by a series of assignments.

23. A simple example is a proposed developer who uses a number of different agents to approach adjoining or nearby landowners to buy their properties in the name of the agent. The various agents then assign the benefit of the contracts to the developer. Notice is given to the vendors and the conveyances are all then in favour of the developer. There appear to be two issues; one is whether they are still separate conveyances if effected in unison and for a common purpose and reason. Further, once there are a series of assignments will the Commissioner be satisfied that the persons conveying the land are still acting separately and independently?

I might interpose. On that particular issue, I have been contacted by one or two other persons interested in this particular provision of the Stamp Duties Act who, as with this tax lawyer, are seeking clarification of the commissioner's intentions. I return to the submission:

Clauses 95 to 104

24. These clauses remove goods from the tax base.

25. Unfortunately, whilst simplifying the situation and removing red tape they leave a number of practical issues that should be addressed as part of this program. These are discussed below.

Clause 107

26. Whilst this amendment removes a similar anomaly to that being removed from the land tax provisions in respect of charities etc (as discussed above) and ensures that it applies in all situations (whether voluntary conveyances or conveyances on sale) the scope of the relief is now much narrower because of amendments made last year.

27. The amendment excludes from the exemption property the subject of a voluntary conveyance to a charitable or religious body where the Commissioner is satisfied that it will be used for a commercial or business purpose. Whilst the exclusion may be appropriate in respect of an arm's length purchase, if it is a voluntary disposition in favour of the charity etc the basis for excluding such relief is to be questioned. Such dispositions were for many years simply exempt.

28. There also appears to be a doubt as to whether a charity etc that simply acquires land by way of investment to derive rent will now be denied an exemption under this amended general exemption. In some other areas of the state taxation laws, the letting of property is regarded, though it may be questioned, as a commercial purpose. If this is applied to this provision, then there is a real risk that the relief will not be available if the purpose of the acquisition by the charity is simply as an investment for the purpose of deriving rent.

29. An example of the difficulty that has been created is simply described. A taxpayer wishes to benefit his church and ensure it has a secure income stream. He makes a voluntary disposition of a property to the church. The property is a small commercial property with a ten year lease to a commercial lessee. The church will receive the income for the next ten years. Based on the amended exemption it appears unlikely that this voluntary disposition is free of stamp duty and the church will also be required to pay land tax on the property.

Taxation Administration Act

Clause 109

30. The proposed amendment ensures that the amount that must be paid as a precondition to an appeal is limited to 50% of the primary tax. Whilst this is a further improvement to an onerous provision, the issue remains that there are only a couple of jurisdictions that require payment as a precondition to appeal a decision or assessment of the Commissioner.

31. It remains an unfair barrier for taxpayers. Whilst it is commonly said it stops frivolous appeals, many such appeals are already stopped by the fact that currently all appeals only go to the Supreme Court. That itself is a deterrent to frivolous appeals with the cost of the filing fee and a risk as to an order for costs on an unfavourable decision as a minimum.

32. It was suggested some years ago that the jurisdiction to hear some state taxes appeals would be vested in the South Australian Civil and Administrative Tribunal. This has not occurred. Even when it does occur the continued existence of the requirement to pay 50% of the primary tax is an unfair impediment for taxpayers wishing to challenge decisions and assessments of the Commissioner. It also appears inconsistent with the goals and objectives of establishing such tribunals as set out in section 8(1) of the of South Australian Civil and Administrative Tribunal Act 2013.

Some Matters Incidental to the Amendments

Goods and Minor Interests in Land

Leasehold interests

33. A lot of small businesses are conducted from leased premises. Whilst goods have been removed from the tax base the existence of these minor land interests still requires the transaction to be stamped and often minor amounts of duty to be paid.

34. There should be a threshold to exclude these transactions and limit the associated red tape and costs of stamping the documents, which often involves very minor amounts. It is suggested this be effected by excluding any leases of five years or less that do not involve related persons. The concept of related persons is already used in section 60A(4a) and defined in section 60A subsections (6) and (7) and can therefore be simply adopted.

35. For example, a taxpayer buys a business conducted from a shop in Rundle Mall. The lease has three years to run. It is subject to market rent reviews every two years. The purchaser pays for the goodwill, the tenants plant and fittings. Some of those items form, more arguably, part of the tenant's rights and give the lease a value of say $30,000. Duty is payable on the $30,000 is $480.

36. If the tenant's items were treated separately from the land they would be personal property and duty free. In addition to the duty the purchaser has to pay the costs associated with the stamping of the transfer or assignment of the lease. In this situation, if there is an exemption for a lease of say five years and less between non related parties then this red tape, minor duty and incidental costs will be removed.

Apportionment Issues

37. With the removal of duty on all property other than land (and some indirect interests in land) practical issues have arisen as to the duty payable where the relevant dutiable instrument does not apportion the consideration between the land and other property.

38. It is suggested that to simplify some of the issues that are currently arising that section 60A of the Stamp Duties Act 1923 (SA) be amended to include a provision that permits the Commissioner to stamp an instrument where there is no apportionment between land and other property using the Valuer-General's published capital value (where it exists) as the value of the land. This will provide a legislative warrant for the Commissioner to use the capital value and certainty for most taxpayers.

39. Whilst such capital value may be used both the Commissioner and taxpayer should be permitted to adopt another value where the circumstances demonstrate that the value of the land is something different. There have been instances, where some businesses and the land used in the business are sold together and because of say the trading history of the business, the sale price of the both is less than the Valuer-General's published capital value of the land. In such a situation there are likely to be real issues as to the appropriate value of the land such that the Commissioner and taxpayer should be allowed to apply different value.

Some Other Matters of Practical Significance

Taxation Administration Act

Lack of Assessments

40. In practice much of the state taxation system has moved to a self-assessment regime within the current legislative framework. This has led to a number of anomalies. It is submitted they should be remedied to provide legislative certainty for taxpayers that does not exist at this time. Two in particular are described below.

Lack of Assessments—No Assessments

41. One area of significance is where an exemption is applicable under a taxation law. In such a situation currently no assessment issue showing the exemption applies and that there is a nil assessment. As a consequence, the five year time limit against reassessments never starts to run. There is simply no certainty for taxpayers.

42 So on a subsequent audit the Commissioner is not constrained by the five year time limit from the issue of an assessment as there has been no assessment. In theory the Commissioner on an audit can go back to the commencement of the legislation, where relevant, as there is no legislative limitation in those circumstances. In practice the Commissioner often only goes back the five years, but that is not always the case.

Lack of assessments—RevNet

43. Part 6 of the Taxation Administration Act 1996 (SA) (TAA) permits the Commissioner to establish arrangements for the payment of tax and lodging of returns by special arrangements. These provisions, when first introduced, were limited to a small class of taxpayers (banks and financiers stamping mortgages under provisions of the Stamp Duties Act). They have now been used to develop a system whereby taxpayers and their agents in effect self assess most liabilities for duties under the Payroll Tax Act and the Stamp Duties Act.

44. The system established by the Commissioner for this purpose is styled RevNet (Revnet) and relies on the use of online facilities, in part. At the time of the passage of the Taxation Administration Act 1996 (SA) (TAA) the use of the Internet more broadly than Universities was in its infancy.

45. The difficulty with Part 6 from a taxpayer's perspective is that it does not adequately deal with the self assessment regime that it has been used to implement. Other States have dealt with it more extensively.

46. In the limited context in which the provisions were initially used it was adequate and facilitative. It is doubtful that anyone foresaw what it would facilitate. It is our understanding that the Commissioner is of the view that a stamping of a document under RevNet or the completion of the payroll tax return process through RevNet never constitutes an assessment. In effect section 10(4) of the TAA (limiting the time in which the Commissioner may make a reassessment), in the view of the Commissioner never applies to payments and determinations made using RevNet.

47. A simple example of both is a Payroll Tax grouping situation. Two taxpayers are de-grouped in 2002 by the Commissioner following an application to him. Each thereafter has paid payroll tax on that basis. Since the advent of RevNet they have completed their online lodgement and payment. The businesses have grown and some entities have been added to the two groups and some changes have occurred. In 2008 and again in 2009 the payroll tax legislation in respect of grouping altered. In 2015 they are audited. The Commissioner takes the view that he questions whether they were properly degrouped but in any event the change in the legislation result in different groups and those different groups were not the subject of the original degrouping application. In that situation there is nothing preventing the Commissioner issuing assessments for the last 14 years.

There is a note to that following, which says:

In that situation at its very simplest two payroll thresholds have been available. On a grouping this will be reduced to one. So the loss of one threshold of $600,00 at 5% tax involves $30,000 per annum plus interest and penalties. The primary tax on that basis for 14 years is $420,000, a penalty of 25% ($105,000) if the Commissioner takes the view that there was not reasonable care and interest at market rates over the 14 years. Most labour intensive smaller businesses cannot deal with such unexpected liabilities, particularly where they think they had obtained a degrouping from the Commissioner. Even five years is an impost in such a situation.

Finally, it states:

No Right of Review of Decisions on Penalty and Interest

48. Matters of penalty and interest imposed by the act and the decision of the Commissioner not to remit are declared not to be reviewable by the TAA. In other words, the Commissioner's decisions on such remissions are wholly excluded from the merit review that may occur on an objection. In our submission this has been and is an unreasonable position. The decision should be subject to a merit review.

That concludes the advice from the tax lawyer. As I indicated last year in reading that into the record, it does not in any way indicate that at this stage the Liberal Party agrees with everything and every proposition for change outlined in the submission, and nevertheless we do believe that they are issues deserving of a detailed response from Revenue SA and the government, and as a result of that would be prepared to pursue the issues during the committee stages to see whether or not the government is prepared to amend its own legislation in some areas, possibly along the lines that have been canvassed by this tax lawyer. With that, we agree with the second reading of the Statutes Amendment (Budget 2016) Bill.

Debate adjourned on motion of Hon. T.J. Stephens.