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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 (resumed on motion).

(Continued from page 3280.)

The Hon. P. HOLLOWAY (Minister for Police, Minister for Mineral Resources Development, Minister for Urban Development and Planning) (20:22): I thank the Hon. Mr Darley and the Hon. Mr Lucas for their contributions to this debate.

During the debate, the Hon. Rob Lucas asked a number of questions, and I provide the following responses. The honourable member asked: which jurisdictions have agreed to harmonise their payroll tax provisions in relation to the eight areas that are the subject of this bill? I am advised as follows. All jurisdictions have committed to harmonisation in the eight areas. The eight areas nominated for greater harmonisation originally included the timing of payroll tax payments, which was subsequently found to be sufficiently consistent, therefore no changes are being made in this area.

New South Wales and Victoria have already legislated, with effect from 1 July 2007, in relation to these matters. All other jurisdictions have committed to implement these reforms from 1 July 2008, with the exception of Western Australia, which will delay implementation of an expanded commissioner's discretion to disallow grouping until 1 July 2009.

As I understand the honourable member's second question, he asked for a breakdown of the revenue implications in relation to each of the eight different areas where changes are being made in this bill. He asked whether business will benefit from or be disadvantaged by the changes in each of the eight areas. Given that no changes are being made in relation to the timing of payments, I am advised that the breakdown of costs in relation to the seven remaining areas are as follows:

Motor vehicle allowances: the motor vehicle allowance changes are estimated to result in a revenue cost of $0.9 million in 2008-09, $1 million in 2009-10, and $1.1 million in 2010-11. South Australia will increase its exemption rate for motor vehicle allowances to align with the Australian Taxation Office large car rate for income deduction purposes. South Australia currently has a lower motor vehicle allowance rate, therefore all taxpayers paying motor vehicle allowances will benefit.

Accommodation allowances: the accommodation allowance changes are estimated to result in a revenue cost of $0.9 million in 2008-09, $1.0 million in 2009-10, and $1.1 million in 2010-11. South Australia will increase its exemption rate for accommodation allowances to align with those set by the Australian Taxation Office for income deduction purposes. South Australia currently has a lower accommodation allowance rate, therefore all taxpayers paying accommodation allowances will benefit.

Fringe benefits: the fringe benefit changes are estimated to result in a revenue cost of $0.9 million in 2008-9, $1 million in 2009-10, and $1.1 million in 2010-11. The use of the type 2 gross-up factor under fringe benefits tax legislation will benefit taxpayers because it results in a smaller gross-up of fringe benefits relative to the type 1 gross-up rate.

Work performed in another country: currently, wages paid or payable in respect of services that are performed wholly outside Australia for a continuous period of more than six months are exempt from the time the initial six-month period overseas has been served. From 1 July 2008, such wages will be exempt from payroll tax from the commencement of the period of overseas service. No costing is available for this measure, but the government considers that the revenue impact will be minimal, with the changes benefiting all affected taxpayers.

Superannuation contributions to non-employee directors: I can advise that businesses that make superannuation payments to non-employee directors will have to pay payroll tax on these payments where they did not have to do so before. The government considers that the revenue impact in this area will be minimal.

Grouping changes: the grouping changes are estimated to result in a revenue cost in 2008-09 of $2.8 million, of $3.2 million in 2009-10, and of $3.4 million in 2010-11. The main reason for the revenue cost in the grouping provision is that the common control test threshold will now be more than 50 per cent, where previously it was 50 per cent or more. All businesses that were previously grouped due to a common control interest of 50 per cent will now fall outside the provision. Changes have also been made to the provisions in the following areas:

the definition of 'business' has been aligned;

the criteria for groups arising from the use of common employees have been aligned; and

in determining controlling interests, a new category of grouping will be adopted that provides for the tracing interests in corporations.

I am advised that, while particular circumstances could arise in which a business could be disadvantaged by these changes, I understand that no submissions from any particular businesses have been received on the basis that they may be unfairly disadvantaged.

I am further advised that the proposed tracing provisions were introduced in Victoria from 1 July 2007 and that the Victorian Revenue Office has advised that they did not find these provisions to be contentious with taxpayers and that the revenue implications have not been significant.

Employee share acquisition schemes: there will be no revenue effects in respect of these provisions. Employee share acquisition schemes are currently liable to payroll tax through the general provisions in the Payroll Tax Act relating to the definition of wages. The new specific provisions will, however, provide more transparency.

Exemptions: in addition to the eight areas of harmonisation, the government has also agreed to introduce four new exemptions into the Payroll Tax Act. The provision of these exemptions will provide benefits to all affected taxpayers. The exemption for adoption and maternity leave payments is estimated to result in a revenue cost of $0.5 million in 2008-09, of $0.6 million in 2009-10, and of $0.6 million in 2010-11.

The exemption for charities is estimated to result in a revenue cost of $0.9 million in 2008-09, of $1 million in 2009-10, and of $1.1 million in 2010-11. The exemption for volunteer and bushfire emergency workers is estimated to result in a revenue cost of $0.9 million in 2008-09, of $1 million in 2009-10, and of $1.1 million in 2010-11. The exemption for the Community Development Employment Project is estimated to result in a revenue cost of up to $0.5 million in 2008-09, up to $0.6 million in 2009-10, and up to $0.6 million in 2010-11. The second reading explanation states:

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

The Hon. Mr Lucas asked: does this mean that South Australia is the only state to retain this discretion? I am advised that all jurisdictions have committed to retaining or introducing the commissioner's discretion in the same form as it appears in the bill; that is, South Australia would be consistent with all jurisdictions in that regard. I again note that implementation of this measure in Western Australia will be delayed until 1 July 2009. I trust this answers the questions adequately for the honourable member.

Bill read a second time.

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