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Legislative Council - Fifty-First Parliament, Second Session (51-2)
2008-06-17 Daily Xml
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PAY-ROLL TAX (HARMONISATION PROJECT) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 6 May 2008. Page 2708.)

The Hon. R.I. LUCAS (15:49): I rise to support the second reading of the Pay-Roll Tax (Harmonisation Project) Amendment bill. I have some brief introductory comments to indicate that it has been a long-held policy position of the business community and business groups across Australia in relation to state taxes (payroll tax and stamp duty in particular) to see consistency as the ideal situation. They argue that many of them now are operating in all or most states and territories and it is inconvenient for them to have to administratively work with different jurisdictions for different state tax requirements. Certainly, from companies' administrative viewpoints one can see that but, in the end, it is a natural end product of having a federation of eight states and territories with their own powers in relation to state taxation.

What we are seeing here is the end result of the half-way house, that is, a degree of harmonisation of payroll tax regimes between, I think, some of the states and territories, and that is one of the questions I have for the government. Certainly, harmonisation is being undertaken between New South Wales and Victoria and, I believe, possibly Queensland and Tasmania. However, as I said, it is the half-way house. Businesses and business groups are pleased to see progress in terms of harmonisation, and I am sure they will welcome some of these changes, but in their ideal world there would be one consistent piece of legislation that applied to all jurisdictions.

With those introductory comments, I will address some specific issues and raise questions to which I seek a formal response from the government before we conclude the committee stage of the debate. First, I seek confirmation about exactly how many of the states and territories are being harmonised as part of the bill before us and, I assume, similar legislation in other states and territories.

I do not intend to go through the second reading explanation in detail, but it lists eight broad areas of proposed harmonisation, including things like introducing standardised exemption thresholds for motor vehicle and accommodation allowances, issues relating to fringe benefits, calculations being grossed up for payroll tax purposes, superannuation provisions, etc. For each of those eight broad areas listed, I seek an indication from the government regarding whether or not any businesses within South Australia will be disadvantaged—that is, pay higher payroll tax—under the changes proposed in the payroll tax harmonisation bill, or whether certain businesses will pay a lower taxation level. In addition, if there are to be changes, has the tax office estimated the number of businesses that might pay higher or lower tax? If there are such estimates, what is RevenueSA's estimate of revenue gained or lost to the state resulting from these changes? Some of these are, I think, clear cut; there is just one set of questions.

In the fifth category, the grouping provisions of the act, there are four separate subcategories: 'Where the government argues for interjurisdictional consistency the grouping provisions will be amended in the following areas'. I seek from the government an explanation for each of those four subcategories. The first is the definition of businesses changed. In each of those subcategories will there be businesses that have to pay more as a result of this change or will there be businesses that pay less? Again, if there are such businesses, what is the estimated impact on revenue from each of those changes?

It is clear, for example, that some businesses will have to pay increased levels of payroll tax. To take the clearest example, as I understand the second reading the fourth example is that the act is to be amended to include superannuation contributions for non-employee directors in the payroll tax base. Currently South Australia and Queensland are the only jurisdictions not to include contributions to non-working directors in their tax base. My understanding is that at the moment the payroll tax provisions in South Australia are such that, if you are paying as part of your remuneration package for a non-employee director of a company (I am delighted to see the Hon. Mr Darley following the debate with interest), evidently that is not included in the tax base for the calculation of payroll tax.

As a result of this harmonisation, we are now for the first time going to incorporate those estimates for those businesses into the payroll tax calculation for those companies; therefore, on my understanding, those companies will be paying more payroll tax. I am happy if the government's advisers come back to me with a formal response saying that my understanding is wrong. However, I am seeking, if it is correct (and this is an example of a number of the others), how many businesses it is estimated will be impacted in this way. I accept that in some cases RevenueSA might not be in a position to give an estimate. It might say that it does not have the information to be able to provide those answers.

Having been a treasurer, I accept that in some of these changes it might not be. able to provide those answers. Nevertheless, the commissioner will be able to say that the belief is that there will be only a very small number and that the revenue impact will be less than $50,000, less than $1 million, less than $100,000 or whatever it might happen to be. However, that will not be the case in relation to a number of the other changes.

Having been a treasurer and having had the commissioner report to me on these issues before, I am aware of what information the commissioner has available, and clearly RevenueSA has considerable information available to it, and I would be surprised if it has not done it already. As part of a brief to the current Treasurer, I am sure the Treasurer should have been asking these questions as well. For each of these changes what is the impact, who is disadvantaged and how many, who is advantaged and how many and what is the cost? I hope the Treasurer is asking these questions: what is the impact for each of these changes on the revenue base; and what will it cost us, or will we ratchet back a bit of extra money as in change four? In some other cases less money will be collected because some businesses in South Australia will be advantaged by the harmonisation. As I read potentially the first one, I suspect that that might be one where some businesses in South Australia will be advantaged. I am unsure of that, and that is the reason for putting the question to the government.

I do not believe the parliament ought to sign off on laudable legislation. The Liberal Party supports the legislation. Having read the second reading debate from the House of Assembly, it is an understatement to say that it was not an extensive or detailed debate in committee, but we in this place have a role to play in relation to these things and the parliament ought to know what the impact will be of these changes on businesses in South Australia. If the government comes back and says that only 50 businesses will pay more pay roll tax and 5,000 as a result of this bill will pay less, and the net cost to revenue of all these things is $500,000, at least that information is on the public record and the parliament, before signing off on the legislation, is armed with that information. Obviously, and with the greatest respect to RevenueSA and Treasury, ultimately we can be judged further down the path whether or not the estimates and the implications of the legislation have resulted in what was originally intended by the drafters of the legislation at this stage.

It is an appropriate time to raise that issue, because we will debate later this evening the Stamp Duties (Trusts) Amendment Bill. When I was treasurer, based on the best advice we had at the time in relation to land-rich entities and such things, we undertook various changes, and it would appear that we are now having to go back in again, as a result of further court decisions and other advice, to try to achieve the same ends. That is the reality of things. Sometimes, with the best advice in the world, we do not achieve the ends that we desire; or the lawyers on the other side of the fence become cleverer and think of new ways to get around, in that case, the stamp duties legislation.

Trust me, Mr Acting President, when I say that the lawyers are just as active in relation to payroll tax, particularly on issues such as grouping provisions. There are many examples—I will not say whether there are hundreds or dozens—where lawyers and accountants advising businesses have ongoing debates, discussions and arguments with RevenueSA on issues such as grouping provisions of companies and the appropriate level of payroll tax that needs to be paid by an entity or a group of associated entities that might have been grouped by the commissioner.

I ask the minister specifically what is intended by the comment in the second reading about grouping provision which said:

South Australia is to retain the Commissioner of Taxation's discretion to disallow grouping except for related corporations pursuant to the Corporations Act 2001 of the commonwealth.

I want specifically to know what is meant by that statement in the second reading, and are we the only state to retain the commissioner's discretion in relation to these issues? Are all other state commissioners, or their equivalents, in other jurisdictions forgoing their discretion in relation to the disallowance of grouping? As I said, I seek from the government a formal response in relation to that.

I flag these questions and, for the speedy passage of the bill, if I could receive from the government a formal response which I was able to read before we enter the committee stage of the debate, that would, from my view, potentially shorten the committee stage of the legislation. It may well be, knowing the competent officers of RevenueSA, that they can respond in detail to many of these questions beforehand, which will mean that in the committee stage I will not need to go through each of these sections seeking that sort of information from the minister and the government. It may well then be there is less than a handful of areas that I would need to pursue in the committee stage.

I am really in the government's hands in relation to this. I was quite happy to speak first today, although I thought we were doing the Supply Bill. At least this gives the minister and the government the opportunity to take advice and, as I said, if they can provide me with the written advice the minister will read into the end of the reply to the second reading and, hence, I have a chance to look at it and take my own advice on the issue, I am sure that will short-circuit any extended committee stage of the legislation.

The Hon. J.A. DARLEY (16:04): I rise to indicate my support for the second reading of this bill, but I wish to reserve my position in relation to the third reading. I do so on the basis that I believe that all taxes should be relative across Australian jurisdictions, and this bill is really the starting point for that, in terms of payroll tax.

I understand that, in 2007, the first major national overhaul of payroll tax arrangements was agreed to by state and territory treasurers in Canberra and that these reforms are the result of that collaborative effort between the respective treasurers and revenue officers of each state and territory and the outcome of a separate review of payroll tax provisions undertaken by New South Wales and Victoria, with all jurisdictions agreeing to move towards the adoption of a series of arrangements as agreed to between New South Wales, Victoria and Tasmania.

The new arrangements will see the states and territories adopting common provisions and definitions for a number of matters. However, the states and territories will retain control over individual rates and thresholds. I understand that the amendments also address some of the concerns previously raised by the Australian Institute of Chartered Accountants and that it will continue to monitor developments in this area.

I, for one, would welcome any reforms aimed at improving interjurisdictional consistency, simplifying and harmonising provisions across the country, cutting red tape for thousands of Australian businesses and introducing even greater benefits to taxpayers, as these reforms are intended to do. I am pleased to hear that the government is committed to achieving these measures, in line with other states and territories.

Whilst I am pleased to hear that South Australia's payroll tax rate will be equal second lowest in Australia, I raise one other matter that concerns me. I believe that all states and territories should adopt the same rates and thresholds. Perhaps this is something that ought to be considered further down the track, and I will be interested to hear more on this issue during the committee stage.

Debate adjourned on motion of Hon. B.V. Finnigan.

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