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Legislative Council - Fifty-Third Parliament, Second Session (53-2)
2015-11-17 Daily Xml
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Bills

Statutes Amendment and Repeal (Budget 2015) Bill

Committee Stage

In committee.

Clause 1.

The Hon. R.I. LUCAS: Whilst I suspect that the opposition and government might have an opposition in terms of procedure on the next agenda item, which is CTP, I would like to propose a course of action in relation to the budget bill, which hopefully would see it passed by Thursday, which I am sure is the government's intention.

At the outset, can I make some brief comments. First, I thank the minister and, in particular, the officers from Revenue SA, who went to considerable effort in the minister's mammoth reply to the second reading, where they responded to a series of concerns and questions raised by a prominent tax lawyer in South Australia in relation to the proposed drafting of the tax provisions of this bill.

As a result of that I am pleased to acknowledge that the government, I am sure on the advice of Revenue SA officers, has tabled a series of 15 amendments to pick up many of the points raised by this particular tax lawyer. There remain some significant ongoing differences of opinion. I acknowledge those, and will make some comments about some of those in the specific sections of the clauses when we get through the committee stage.

I note that the government has tabled (which I only became aware of this morning) a further series of amendments as of yesterday, I think—a file date of the 16th. I suspect they all relate to the one issue, which is the local government extractive issue that was raised. It might assist the committee if the minister, in clause 1, could outline the nature of the amendments and the purpose of the amendments and what the government's compromise position is, and then I am going to suggest that after clause 1 we report progress.

I also note that the Hon. Mr Hood has filed amendments, dated yesterday as well, and certainly it would be useful if the Hon. Mr Hood could briefly outline the purpose and nature of the amendments he has moved. I suspect they all relate to the single issue, and that would be useful as well. I also propose to put some further questions to the minister and the minister's advisers at clause 1 in relation to potential further amendments.

If we can go through this process at clause 1 today, certainly it would be my intention to consult quickly over the next 24 hours and proceed and conclude debate, at least from our viewpoint. If the opposition and government are happy, that would be enough to get it through the chamber by close of business on Thursday. I thank the minister for the detailed response and, as I said, the first series of 15 amendments which she has tabled and which we will address during the committee stage of the debate.

I do want to briefly refer to one section which was a detailed debate about some stamp duty provisions for which I am indebted to my colleague the member for MacKillop who raised the matter on behalf of his constituent. It dated back to amendments to the Stamp Duties Act dating back to 1990 and issues that former shadow treasurer Stephen Baker had raised.

I will not trace the long history here as it is now on the record, but I do want to acknowledge that the government has acknowledged that, given the minimal impact to the state's revenue and the representations made by the government in 1990, the government will consider amending section 67 of the Stamp Duties Act in a similar way to that proposed by Mr Baker in 1990 as part of next year's budget.

I thank the government. I guess it is not a firm commitment: the government says it will consider amending section 67 of the Stamp Duties Act, but I think the government is acknowledging there that commitments were given by the former government in 1990 about how this provision would be interpreted. For a variety of reasons that the government has outlined, that has not eventuated.

The member for MacKillop has raised the issue and the government has acknowledged that it will have a look at amending this section in next year's budget. I am sure the member for MacKillop and his constituent would have preferred that it might have been part of this particular package of amendments, but I am sure he will be grateful for the acknowledgement that the government is considering amending it in next year's budget.

As a result of consultation with now two prominent tax lawyers in South Australia—and there seems to be a growing band—I want to place on record some further recommendations for change that they have made. I want to place on the record that I will be seeking the government's or, in particular, RevenueSA's response to these particular proposals to see whether or not the government, as it has done with the first 15 amendments that it has tabled, is minded to agree with the particular issues of law that these now two prominent tax lawyers have collaborated on drafting as potential amendments.

I want to place on the record now that advice for consideration by the government. It would assist the opposition, obviously, if we could get that response by late tomorrow so that we can form a view by Thursday morning to, hopefully, conclude the debate late on Thursday. The first issue is in relation to trust interests under clause 26. The recommendation is to add a new subsection (4) to read as follows:

Subsection (2) has no application to an instrument the value of which is to be determined in accordance with section 104B(3).

The second recommendation is in relation to clause 38. It is suggested that amendments along the following lines be adopted:

2.1 The proposed section 104B(2) be modified to read:

(2) In connection with subsection (1) but subject to subsection (3), this Division does not affect the operation of:

(a) any other provision of this Act that is relevant to the determination, calculation or imposition of duty in relation to land or prescribed goods;

(b) Part 4 of this Act;

(c) sections 71(3)(a) and 71AA of this Act

2.2 A new section 104B(3) reads as follows:

The value of the property conveyed by an instrument for the purposes of this Act:

2.2.1 to which paragraphs (i) and (ii) of section 71(3) applies is limited to the value of the land or any prescribed goods the subject of the transfer; or

2.2.2 to which any of the following provisions of this Act applies:

(a) paragraphs (iii) to (vi) of section 71(3);

(b) section 71AA;

is limited to the amount computed in accordance with the formula in subsection (4):

2.3 A new subsection (4) read as follows:

Amount for Computation of Duty = (A – B – ((C-B) x (A/D)))

Where:

A is the unencumbered value of the land and prescribed goods;

B is the amount secured over the land (if the amount is secured on the land, prescribed goods and other property then the amount secured is to be prorated between the unencumbered value of that land and the prescribed goods and the unencumbered value of the other property and for the purposes of this provision other property includes land outside the State);

C is the amount of any liabilities of the trustee (whether secured or not) that the trustee is entitled to be indemnified out of the property of the trust; and

D is the unencumbered value for property the subject of the trust.

2.4 A new subsection 104B(5) read as follows:

Subsections (2) expires on 1 July 2018.

2.5 The proposed section 104B(4) be renumbered as section 104B(6) and amended to remove the words 'the term includes goods' from the second line of the definition of prescribed goods.

3. The purpose of the foregoing suggested amendments is to deal with the difficulties created by the nature of an interest in property the subject of a trust or to be subjected to a trust. As currently drawn, the proposed sections 14(2) and 104B(2) do not adequately recognise that a trust interest is a species of property in its own right and different from the underlying property of the trust or that the obligations of the trustee are to be met from such property. The proposed amendments currently appearing in the Bill appear to suggest you look through the trust without adequately describing how that is to occur.

4. The foregoing is an attempt to address that issue. It does not adequately address partnership interests but that has been a problem area for many years and the Commissioner has artificial rules for dealing with such interests.

Mixed Use Property

5. Clause 50

Add a new section 71DC(9):

Notwithstanding the foregoing provisions where land is used or to be used for more than one purpose one of which renders it qualifying land and another or other that do not the Commissioner must make a fair and reasonable determination of the proportion of the land that is used or is to be used for a purpose that renders it qualifying land and the proportion of the land that is used or is to be used for a purpose that does not render it qualifying land

6. Clause 53

Add a new section 105A(7)

Notwithstanding the foregoing provisions where land is used or to be used for more than one purpose one of which renders it qualifying land and another or other that do not the Commissioner must make a fair and reasonable determination of the proportion of the land that is used or is to be used for a purpose that renders it qualifying land and the proportion of the land that is used or is to be used for a purpose that does not render it qualifying land

Add a new section 105A(8):

From and after 1 July 2018 delete section 92(2) and replace it with the following:

A local land asset is a land asset consisting of an interest in qualifying land (as defined in section 105A) in South Australia.

7. The proposed abolition of duty on commercial property does not provide any adequate mechanism to deal with mixed uses or proposed mixed uses. It simply looks to its current predominant use. Is an apartment hotel a residential use or a commercial use? Is a property with a shop below and an apartment above predominantly used for commercial or residential use? Is it based on floor area or amount of rent or some other basis?

8. If a developer purchases property in the CBD to develop a combination of commercial premises on the lower floors and apartments in the upper floors, then the developer should be entitled to obtain relief if the property is not currently used for commercial purposes but for residential purposes.

9. The second proposed amendment ensure that after 1 July 2018 the landholder provisions of Part 4 only apply to non commercial land.

Those amendments in those two broad areas, as I said, are the combined views of a couple of prominent tax lawyers. The opposition is not subscribing to the detail of those proposition but is, on the basis of their considerable expertise, asking the government to respond as to whether or not it sees merit in any or any part of or all of those propositions in terms of possible amendment to the budget bill.

I conclude my contribution to clause 1 in the second reading on that basis to indicate that, in relation to the two new sets of amendments that have been proposed by, firstly, the government, we are engaged in active consultation as we speak, given that, as I said, I only became aware of them this morning; they were filed yesterday. As best as we understand them, this is the government's compromise that has been worked out with the local government sector. If that is the case, then it is more than likely that we are prepared to support them.

In relation to the Hon. Mr Hood's amendments, I had a brief discussion with the Hon. Mr Hood and it is probably more than likely that even if we were to agree or not in principle with what he has indicated, the principal position we have adopted with the budget bill is that even where there have been elements that we have disagreed with we have highlighted those disagreements, but we have not sought to defeat the substance of the government's budget package and it is therefore likely that that would be our response to the Hon. Mr Hood's amendments.

We will hear his argument during the committee stages, and I suspect that in part the issues he raises—not completely—have been prompted by the concerns which the tax lawyer raised and which I placed on the public record about retrospectivity, and the government's response is on the public record in relation to the concerns that we raised during the second reading stage. With that, I indicate our wish, hopefully having heard from the minister and the Hon. Mr Hood, to at this stage report progress and with the intention of consulting over the next day and, from our viewpoint, concluding the debate on Thursday.

The Hon. D.G.E. HOOD: I have been asked by the leader of the government to give a brief outline of my amendment to the chamber. I am happy to do so here at clause 1 and, obviously, I will argue the case in a little more detail when we get further into the committee stage. First of all, I apologise to the chamber that this amendment was only filed yesterday morning. I had understood that it was to be filed Friday which would have given the opposition time to consider it at their regular Monday meeting. Anyway, it is what it is and the chamber will have an opportunity to consider it once this matter is adjourned today at the conclusion of clause 1.

In very simple terms, my amendment deals with the matter of when stamp duty is actually charged or the calculation is made, if you like, on a property conveyance. There has been some sort of long-running dispute, as I understand, about when that should be. I understand RevenueSA has held the view in recent times, at least, without formalising it, that the amount of conveyance—the amount of stamp duty, basically—should be calculated upon settlement of the property. It has always been the industry's view, if you like, or the view of the other side of the debate, including The Tax Institute, I should point out, that stamp duty should be calculated at the point where the contract is signed.

I can give you a little example of that where it may not sound much different; for example, if you were to buy property with a 30-day settlement, the difference is probably next to nothing. But if you were to buy property off the plan—an apartment building in the city, for example—then you could buy it before the building has even commenced. It may not be completed for 18 months, or possibly even two years in some cases, and in that case the market value of the property can change substantially. Although the agreed price will not change, if the stamp duty is calculated on the higher value of the property—that is the settlement day some 18 months to two years later—then, obviously, the amount of stamp duty could be substantially more.

Theoretically, you could have an apartment that sold for $500,000 off the plan, let us say, having a market value of $550,000 or even possibly $600,000 a couple of years later, depending on market conditions, and then the stamp duty calculated on that higher amount would be substantially more. That is an issue which I think my amendments will address. I should point out as well that all of my five amendments deal with this one single issue. Four of them are consequential on that first amendment to clause 27, and, just as a point of clarity, my amendment really just opposes those clauses. It does not seek to make any other changes, simply to oppose those clauses. That means that those clauses would not appear in the bill.

If I can just take a few moments to read from the Housing Industry Association's submission on this issue. They have written to the Treasurer on this issue, and I am not sure if other members have had access to this; I think it is important that it is made available for members to at least be aware of through my reading it onto Hansard. It is only a fairly short letter and then I think that will conclude my contribution. But, before doing so, I point out that it is not only the HIA that has raised this issue; it has also been raised by The Tax Institute which appears to be arguing along similar lines. This letter from the HIA is addressed to the Treasurer, the Hon. Tom Koutsantonis, and it says:

Dear Treasurer

Statutes Amendment and Repeal (Budget) Bill 2015

I write to you to raise the Housing Industry Association's objection to Part 9 of the Statutes Amendment and Repeal (Budget) Bill 2015 currently before Parliament.

Part 9 of the bill purports to amend certain provisions of the Stamp Duty Act 1923, including section 60A of the Act.

HIA is concerned not only with the intent of the proposed amendments, but also with their retrospective effect—

which is significant, and I note that the Hon. Mr Lucas raised this in his contribution—

from 18 June 2015—the date of the 2015-16 Budget announcements.

The amendments to section 60A of the Act are likely to negatively impact on purchase and development of 'off-the-plan' transactions and development where settlement occurs at a time after contract negotiation occurs and the contract of sale is signed.

HIA understands that the amendment purports to give effect to the views of RevenueSA that the 'date of sale' of a property is the date of conveyance of the property to the purchaser rather than the date of the contract of sale and purchase of the subject property.

Under this interpretation, RevenueSA looks at the date that settlement of the contract occurs and the purchaser is in possession of an executed transfer.

This is important:

In HIA's submission, this practice is an incorrect interpretation of the law.

There is nothing in the text of the current legislation to suggest that the date of the sale is anything but the date of contract.

RevenueSA's incorrect interpretation (and application where it has occurred) is also poor public policy as it deprives contracting parties of certainty. It is manifestly uncommercial to expect arm's length contracting parties, whether that be farmers, developers, builders, or the ultimate home owners to commit to a transaction without knowing what their prospective legal liabilities, including taxation and stamp duty liabilities, will be.

Large scale land development arrangements often involve conditional contracts to purchase land, with subsequent regulatory approvals being obtained during the settlement period. The proposed amendment is likely to significantly increase the amount of Stamp Duty payable by developers and also potentially indirectly impact land owners. It will be an additional impost on home buyers and on economic development in South Australia more broadly.

In addition, noting the general principle that retrospective legislation is inherently contrary to the rule of law, there is no cogent reason, urgency or justification for the amendment to have retrospective effect.

The retrospective application of this provision provides an unfair, unreasonable and unjustified revenue collection trigger for RevenueSA to apply against South Australians, and a strong inhibitor against commercial transactions and corresponding productive endeavours across the state.

Yours sincerely

(signed)

Brenton Gardner

Acting Executive Director, Housing Industry Association Limited, South Australia.

I will leave it there. I think I have explained my amendment so that members will have a chance to consider it before we vote on this, which I expect will be Thursday, and I will be arguing the case during the committee stage then of why my amendment should be accepted.

Progress reported; committee to sit again.

The Hon. S.G. WADE: Mr President, I draw your attention to the state of the council.

A quorum having been formed:

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