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TAXATION LEGISLATION (MISCELLANEOUS AMENDMENTS AND REPEAL) BILL 2002 (No. 90)

Second Reading

Mr KONS (Braddon - Secretary to Cabinet and Treasury Spokesperson - 2R) - Mr Speaker, I move -

That the bill be now read the second time.

The Taxation Legislation (Miscellaneous Amendments and Repeal) Bill 2002 provides for an Act to amend the Duties Act 2001, the Taxation Administration Act 1997, the Pay-Roll Tax Act 1971 and the Land Tax Act 2000. It also repeals the Taxation (Reciprocal Powers) Act 1993.

The amendments contained within the bill are generally of an administrative nature aimed at ensuring continued consistency with the comparable acts of other jurisdictions and to clarify the intent of certain provisions. The changes being incorporated into the acts are not intended to raise any additional revenue. As such, they accord with the Government's new fiscal strategy with respect to maintaining a competitive State tax environment such that there will be no new taxes and no increase in the rate of any existing taxes.

The bill firstly amends the Duties Act 2001. Members may be aware that both Houses of Parliament passed the Duties Act in 2001 to replace the Stamp Duties Act 1931. The act was a result of a joint stamp duty re-write project undertaken by New South Wales, Victoria, South Australia, the Australian Capital Territory and Tasmania.

The aim of the project was to maintain separate State legislation but to have common principles, definitions and structures, where possible, so as to achieve reductions in compliance costs for business and other stakeholders. The amendments contained in the bill before the House were prompted by the development of Tasmanian Revenue Online by the State Revenue Office.

Tasmanian Revenue Online is a web-based system that facilitates self-assessment by taxpayers, allowing them to electronically lodge returns, assess documents and make payments. The establishment of Tasmania Revenue Online will expand the level of self-assessment by taxpayers, which necessitates a number of changes to the Duties Act to ensure its effective operation. Through the process of identifying changes that are necessary to enable effective self-assessment, a number of other issues were identified as needing clarification. Likewise, changes made in other jurisdictions and which need to be mirrored in the Tasmanian legislation have also been identified.

Mr Speaker, in order to clarify the intent of certain provisions, the bill inserts or amends a number of definitions in the Duties Act. These changes are designed to remove doubt and to ensure the original policy intent is maintained. The bill also removes provisions which have become redundant as a result of other changes, or where the provision is duplicated within another act. The removal of redundant provisions helps to maintain the readability of the act.

The provisions relating to mortgages and transfer of dutiable property to superannuation funds have been amended following changes made to similar provisions of other jurisdictions.

Several exemptions and concessions are also amended so that taxpayers are able to receive concessional- duty treatment in cases, which in the past, may have not technically met the requirements of the act, but have been consistent with its policy intent.

The bill also inserts provisions in the Duties Act to allow for the transfer of private residence of de facto couples into joint names to be exempt from duty. This is an aspect of the Duties Act which has disadvantaged de facto couples over married couples in the past.

Mr Speaker, the majority of the amendments to the Duties Act are to be effective from 1 July this year, coinciding with the commencement of the financial year. This will not disadvantage taxpayers as the amendments do not impose changes to current practice.

In line with advice given to the industry and to achieve consistency with other jurisdictions, the amendments to the mortgage-duty provisions are to have retrospective effect from 1 July 2001. This ensures that the policy treatment with regard to the securitisation of mortgages remains unchanged to that which was in place under the Stamp Duties Act.

Amendments to the Land Tax Act 2000 included in the bill are administrative in nature and are necessary to clarify the original policy intent of the act. The amendments take effect from 1 July 2002, being the start of the current land tax year. The land tax amendments contained within the bill before the House seek to clarify a number of aspects of the act through changes to the definitions of 'agent' and 'principal residence land'. In addition, the land tax rebate that is available to land owners who build a new principal residence within a financial year has been extended to include companies, where a person who owns 50 per cent or more of the shares in the company occupies the dwelling. This accords with the definition of 'principal residence land' and therefore removes an anomaly that has prevented companies from applying for the rebate.

The final land tax amendment relates to the recovery procedures available to the Commissioner of State Revenue. At present, any outstanding land tax must be paid prior to the sale or transfer of land. However, in the case where an owner defaults on a mortgage and the land comes under the control of a mortgagee in possession, it is possible that the commissioner will not be able to recover any unpaid debt.

As there is currently no recourse available to the commissioner to seek a payment of unpaid land tax other than from the owner, the bill amends the recovery provisions to enable the commissioner to seek payment from a mortgagee in possession.

Mr Michael Hodgman - This is a new provision, a new law.

Mr KONS - It is clarifying the situation.

Mr Michael Hodgman - No, it's a new law. It's giving the right to send the land tax demand to a mortgagee who takes possession. That's not been the law up until now.

Mrs Jackson - That's right.

Mr KONS - That is correct. Mr Speaker, there have been changes in the payroll tax legislation of all other jurisdictions to broaden the payroll tax base to include eligible termination payments and to use the grossed-up value of fringe benefits.

Tasmania is the only jurisdiction that has not done this. As a result, the application of payroll tax differs from that of other jurisdictions, which may result in undue compliance costs for businesses operating across more than one jurisdiction. Therefore, the bill amends the definition of wages in the Pay-Roll Tax Act 1971 to include eligible termination payments and to use the grossed-up value of fringe benefits. As the changes effectively broaden the tax base, the rate of payroll tax is also reduced from 6.24 per cent to 6.1 per cent. The rate of 6.1 per cent is based on Treasury modelling and should not result in any increased payroll tax receipts as a result of the changes.

The inclusion of eligible termination payments in the definition of 'wages' will result in such payments being treated in the same manner as other wage payments, thus removing a current inconsistency in the tax base. Likewise, the use of the grossed-up value of fringe benefits creates greater equity in the payroll tax system by ensuring wages, whether they are paid in cash or otherwise, are treated in the same manner. In addition, the use of the grossed-up value of fringe benefits accords with the treatment of fringe benefits for Commonwealth tax purposes, thereby reducing compliance costs for business.

A further unrelated change is also being made to the Pay-roll Tax Act in relation to the treatment of wages paid to employees working overseas for extended periods of time. Current practice is to exempt wages paid to employees working overseas for a period in excess of six months, from payroll tax in respect of those wages paid after the six-month qualifying period.

The bill before the House legislates this. This amendment will have no effect on taxpayers as it simply confirms what is current practice and replicates equivalent provisions in both New South Wales and Victorian payroll tax legislation.

The Tasmanian Chamber of Commerce and Industry has been consulted in relation to these changes and has welcomed the increased consistency with the acts of other jurisdictions, which will reduce compliance costs for those businesses operating across more than one jurisdiction.

Mr Speaker, the bill also makes a number of amendments to the Taxation Administration Act 1997. The Taxation Administration Act covers administrative provisions, including investigations, exemptions and compliance, for those State taxes that fall within its scope. The act applies to debits duties, duties, land tax and payroll tax. While the Taxation Administration Act applies to taxes and duties levied in Tasmania and applies to taxpayers who have a liability in Tasmania, it does not presently provide for the exchange of information between jurisdictions and the conducting of interjurisdictional tax investigations. These powers are currently in the Taxation (Reciprocal Powers) Act 1993. All jurisdictions have equivalent reciprocal powers provisions, either in stand-alone legislation or incorporated in their equivalent taxation administration legislation.

The bill transfers these provisions into the Taxation Administration Act and repeals the Taxation (Reciprocal Powers) Act. This will result in all taxation administrative provisions being incorporated into the one piece of legislation. The provisions being incorporated into the Taxation Administration Act are essentially identical to those that currently exist in the Taxation (Reciprocal Powers) Act, while at the same time ensuring that inspection powers are consistent with those of the Taxation Administration Act. Other amendments to the Taxation Administration Act are being made to ensure the efficient collection of tax and to enhance debt recovery provisions.

Currently, the act prohibits the disclosure of information to a third party. This reduces the effectiveness of the collection of outstanding debts where the commissioner has referred the debt to a debt collection agency, as the agency is unable to list defaulters on its credit register.

The bill therefore amends the disclosure provisions to allow debt collection agencies to list tax defaulters on their credit register. This is standard commercial practice and will enhance the effectiveness of debt recovery action. In addition, the requirement for the commissioner to accept cash payments at the Office of the Commissioner is also being removed. At present, very few cash payments are made at the State Revenue Office, given the increased use of electronic funds transfers and the availability of other payment facilities, such as Service Tasmania and the post office. Removal of the requirement to accept cash will have little impact on taxpayers and increase the efficiency of tax collection by removing the need for the added security which is necessary when cash payments are accepted. The bill also includes several minor changes to clarify the intent of the act.

Mr Deputy Speaker, the amendments contained within the Taxation Legislation (Miscellaneous Amendments and Repeal) Bill 2002 are designed to maintain the integrity of the acts that are amended as effective pieces of legislation. As I previously indicated, the provisions of this bill are not intended to raise any additional revenue and therefore will not increase the taxation burden on Tasmanians and Tasmanian businesses. Mr Deputy Speaker, I commend the bill to the House.

Mr GUTWEIN (Bass) - Mr Deputy Speaker, I will start by saying I will keep my comments brief. First of all, I say thank you to the spokesman for arranging a briefing which I must admit we found very useful and we will take you up on the opportunity for that in the future on these types of bills. I note that the Tasmanian Chamber of Commerce and Industry is supportive of the measures included in this bill. However, a couple of questions were raised as a result of the briefing that we would like to discuss in committee. Particularly, one concern that I have is in relation to the payroll tax changes and broadening of the payroll tax base. It concerns me that there will certainly be winners and losers in respect of that. I thank the spokesperson for having Treasury send me a copy this morning of the methodology used but again it does not indicate just how many Tasmanian employers may be affected by this and we would like to explore that a little bit further.

Another issue that we will be looking at too is the definition of ETPs. I was under the impression that the definition of ETPs would be the same definition that was used by the ATO but in scrutinising the bill and looking at the ATO's definition of an ETP it does appear that there are some dissimilarities which we need to have a look at.

As I say, in respect of the broadening of the payroll tax base the grossing up of FBT, I think, will have some negative consequences for some employers and I think that it is something that we do need to look at a little bit more closely in committee.

Broadly, we have no problems with the land tax act amendments. However, a mortgagee in possession and the recovery of the unpaid land tax from a mortgagee in possession is something that we want to explore on the basis of what position that mortgagee may find themselves in if, upon the sale of the property, they do not recover enough from the proceeds to pay out both the mortgage and the unpaid land tax. Obviously, in most cases the mortgagee will be a bank or a large financial institution but there are circumstances where that mortgagee may be an individual or a small company, for example, that may get caught with a debt that they were not previously liable for.

Just to conclude, as I said, we are supportive of the bill. There are issues that we want to address in committee. We acknowledge that a lot of the amendments included here are mainly administrative and we also acknowledge that it brings us into line with other jurisdictions. At this point, we will discuss those other issues in committee in more detail.

Mr McKIM (Franklin) - The Greens certainly support this bill and we recognise that it is generally an administrative bill which aims to clarify the intent of certain provisions. We do understand that the intent is that no additional revenue be raised. But as the shadow treasurer said, there will be winners and losers with the intention to broaden the payroll tax base and then it appears to cut the rate of that tax. It will be interesting to see how that pans out. Yes, we will participate in the committee process, I think.

Mr MICHAEL HODGMAN - Mr Deputy Speaker, I support the remarks of the shadow treasurer, Mr Peter Gutwein MHA for Bass, and again congratulate him on the outstanding job that he has been doing since his appointment to that position.

I can say without any rancour at all to the Secretary to Cabinet, who has brought in the bill, that I always look very carefully at taxation legislation, miscellaneous amendments and repeal bills because they are said to clarify problems that have arisen and to put matters beyond doubt. I have never yet seen one where there is not the opportunity to slip in either an increase in taxation or an increase in the incidence of taxation and once again my investigations have been vindicated. The current position at law, as the parliamentary secretary to Cabinet was frank enough to admit in response to a question I just put to him, is that if land tax is owing on a property and the mortgagor goes into default and the mortgagee then takes possession and reoccupies the property, land tax is not payable by the mortgagee in possession. In other words, there is no obligation on the mortgagee to pay the land tax owing when that debt has been built up and incurred by the mortgagor. I am not discussing the moral question as to whether that is right or wrong but I am just pointing out - and I hope the TCCI has noted this - that where a mortgagee takes the step of regaining possession of a property when the mortgage is in default, the mortgagee will be liable under this amendment to pay the outstanding land tax.

As anybody who knows my long involvement in the law, which now exceeds 40 years, I have never drawn a conveyance in my life, I have never handled a mortgage in my life - the only mortgage I know anything about is the mortgage I have had on 7 James Avenue, Kingston Beach, which I purchased with my late wife back in 1971 and in which my son, the Deputy Leader, and his two sisters were brought up. That mortgage was virtually completely wiped off until I made the mistake of coming back into Parliament. Having said that, I am told by people who know that not all mortgagees are big banks or finance companies, that some mortgagees are the mums and dads of Tasmania who have invested their money with legal firms and other institutions who lend it out on mortgage and they are looking, obviously, to a return on their investment. At the end of the day, Mr Deputy Speaker, hopefully they will get their capital back intact.

We all know what happens when a mortgage goes into default. Sadly, when a mortgagee re-enters and takes possession, then moves to sell the property to recover the moneys, it becomes a bit like a fire sale. Also sadly, the amount lent out on the mortgage is not even recovered. What the mortgagees will have to understand is that, if this legislation goes through unamended, not only will they be up for the capital loss of not recovering the amount they have lent, secured by mortgage, but they may also be required to pay a very substantial land tax bill.

My friend, the shadow treasurer, and I know from his banking experience, the member for Braddon, Mr Brett Whiteley, and others who are more conversant with these matters will raise it in the committee stage. The land tax bill, in certain cases, will run into tens of thousands of dollars. It is a dramatic change in the law. I repeat: I am not debating the moral issues as to whether it is right or wrong, I am simply saying that it is a major change in the law, Mr Deputy Speaker, so it would not be correct just to regard this as a machinery measure. I assume, in view of the comments made in the second reading speech by the Secretary to Cabinet, who now has ministerial rank, effectively, that this matter has been considered carefully by the Tasmanian Chamber of Commerce and Industry which has expressed its approval. I did not note whether it has been considered by the Law Society of Tasmania, which does have a significant say in what the legal profession in this State does in relation to trust funds and mortgages and the like, and whether they approve or not. I will endeavour during the luncheon adjournment to at least make contact, from a shadow attorney-general point of view, to ascertain if in fact the legislation has even been considered by the Law Society. If the bill has gone through by then, I would have to leave it to colleagues in the Legislative Council who have a legal background. You have one within the ranks of your own Government, the honourable Doug Parkinson MLC, who is up there, and the honourable Jim Wilkinson MLC, the Deputy President, and of course the President himself, the honourable Donald Wing MLC, have legal qualifications and, in their cases, substantial years of experience. I do not think I have missed any members of the legal profession up there, but if I have I apologise.

The next matter which did attract my attention is classic Sir Humphrey. It is dealing with the changes in the percentages which should not, it is said, result in any increased payroll tax. That really attracted my attention. To whoever the Sir Humphrey or Lady Humphrey is who drew up this particular paragraph, I am going to read it into the Hansard - it is a classic. Page 4 of the second reading speech:

'As the changes effectively broaden the tax base, the rate of payroll tax is also being reduced from 6.24 per cent to 6.1 per cent.'

I said, 'Well, isn't that fantastic'. In all my years in Parliament, State and Federal, Treasury bills which reduce anything are as rare as hen's teeth, but there it is in black and white. I said, 'That is marvellous', and I was going to come around and congratulate you on doing something which is a total rarity, Secretary to Cabinet. I cannot remember having ever seen it in Tasmania, and certainly not while the current distinguished - and he is my friend - Under-Treasurer of the State of Tasmania has been in charge, or Head of Treasury is his new title. I had never seen it happen before, but then look what the next sentence says:

'The rate of 6.1 per cent is based on Treasury's modelling' -

and look at these words -

'and should not result in any increased payroll tax receipt as the result of the changes'.

Well, well, well! As I said, I do not know anything about conveyancing or mortgages; I know a little about racing and I know about a stallion who got the name 'Weasel Clause'. Weasel Clause has been a very successful stallion. He is the sire of Weasel Will, who has been a very successful group one winner -

Ms Wriedt - I'd have to ask about relevance for that.

Mr MICHAEL HODGMAN - owned by constituents on the north-west coast - Tasmanians. Weasel Will even ran on Saturday in the Sandown Classic.

And here is the weasel clause: 'should not result in any increased payroll tax receipts as a result of the changes'. Well, Cabinet Secretary, whom I hold in high regard and, I might say, affection, I am going to watch this very carefully because when we see financial returns coming in I can assure you at the appropriate time in this Chamber somebody - if not me then somebody in whose direct area it is - will be getting up and saying, 'Well, was Treasury modelling correct or, unexpectedly, was the opposite result achieved? Rather than not resulting in any increased payroll tax, it has gone up.' I would like to be as certain of winning Tatts when I say to you that I am certain, in the fullness of time, that some minor discrepancies in Treasury modelling will emerge and behold - a miracle! The star in the east! There will be an increased receipt in payroll tax because the modelling was not quite what they thought it was going to be.

May I, in relation to two final matters in the second reading, just say I note and commend the Government on dealing with the anomaly which had previously existed in relation to property jointly owned between married persons and de facto couples and the change from single ownership into joint ownership.

Whatever one's moral views about de facto relationships - and I remember my dear beloved late mother having very strong views about that subject - the fact of the matter is that, consistent with the law as it now stands, the anomaly between a de facto couple and a married couple in relation to the transferring of property into joint names be exempt from duty is appropriate. This aspect of the duties act, which has previously disadvantaged those in a de facto couple situation, is now remedied and for that the Government is doing something and is actually paying for honouring the principle. In other words, they are putting their money where there mouth is on that issue so for that they should be commended.

Last but not least I want to deal with the question in relation to the naming of alleged defaulters, tax defaulters, on the credit register. I want the Parliamentary Secretary to listen really carefully to what I am about to say because if this is not done properly you run the risk of severely damaging the credit standing of decent men and women in the Tasmanian community and their businesses.

What is the position where there is an argument where the debt is in dispute? I have no doubt at all that in the eyes of the relevant collector, the Commissioner, that that person is a defaulter, but I want you to give this Parliament an assurance - and as shadow Attorney-General I would be failing in my duty if I did not say this - that where the amount of tax is in dispute or even going before a court or the Administrative Appeals Tribunal or whatever - and remember we do have a State administrative appeals tribunal, part of the magistracy - that the name of that person should not be published in any credit register. If you do you could destroy a small business overnight because let me assure you - I am saying this quite frankly but very firmly and you have had an involvement in business - if there is one thing that starts the lights flashing with ordinary free-enterprise commercial creditors it is if they see that the business they are dealing with is in debt either for tax to the Australian Taxation Office or to the State taxation or in relation to rates payable to local government.

I will conclude by referring to a case I was involved in many years ago where a Greek businessman - now deceased I might say but had been president of our Greek community here in Hobart - had employed from time to time between 100 and 150 Tasmanians who supplied confectionery to over 300 shops in this State. His company, when he formed it into a company, was put into liquidation because the Australian Taxation Office acted precipitately, served notices on him in relation to Greek tax and others and then issued writs against him in the Supreme Court of Tasmania. His major creditors - Cadbury, Nestles and all these big companies - had no doubt at all that he would pay his debts because he always did. When his company was ultimately prosecuted - it is a reported case, the Prima Foods case - for trading whilst allegedly insolvent, eight of the charges related to transactions involving the Australian Taxation Office. I appeared and defended him and all of those charges were thrown out. So what happened was this: the company was wound up and his business collapsed. The debts that he allegedly incurred with the Australian Taxation Office were not debts at all; it was payment of tax which was due by law, but his business was ruined.

I am putting it to you directly, Secretary to Cabinet, in your ministerial responsibility, will you please assure this House that if there is a genuine dispute about the tax payable no person will be listed in the trade gazette or any other commercial publication as a defaulter. Because that will seriously affect their credit rating, not just once but forever. The shadow Treasurer was kind enough to raise this matter with me before the debate because it is a matter falling directly within my jurisdiction, and again I thank Mr Gutwein for the way he is carrying out his duties. Even if it is later withdrawn and there is an apology, the damage is done.

Mr Whiteley - Too late.

Mr MICHAEL HODGMAN - Too late, that is quite correct. So I seek, on behalf of her Majesty's Opposition, your clear statement - and it should be absolutely beyond a shadow of a doubt - if there is a dispute or litigation. I was involved in a case involving State taxation - not poker machines, record players; what are they called?

Mr Whiteley - Jukeboxes.

Mr MICHAEL HODGMAN - Jukeboxes.

Mr Will Hodgman - New-fangled technology.

Mr MICHAEL HODGMAN - It went to the Supreme Court and I argued that the tax was in fact -

Mr Hidding - What's a record?

Opposition members laughing.

Mr MICHAEL HODGMAN - Well may they laugh but they will sizzle. I, along with my friend over there, Mr Graham Sturges, have dutifully served the electors of Denison and they are very happy with me and I have to say that I think they are very happy with him, too. But, having said that -

Mr Sturges - Thank you, comrade.

Mr MICHAEL HODGMAN - We fought this thing in the Supreme Court and, unfortunately, lost. But I find out the other day that the very State tax on the jukeboxes and so on and eight-ball machines, by the munificence of this Government, has apparently now been halved, and I said: 'Well, I have half the argument right at the end of the day.'

Mr Gutwein - The Waterside Workers' Union, was it?

Mr MICHAEL HODGMAN - Yes, I am an honorary life member of the Waterside Workers' Federation of Australia. I think I have taken enough time.

But that assurance from you, Cabinet Secretary, is absolutely crucial. Because if I do not get it I will have to say to my colleague, the honourable shadow Treasurer, 'I will have to really consider my position on this bill, just on that matter alone.'

Mr KONS (Braddon) - Mr Speaker, I move -

That you now leave the Chair and this House resolve itself in committee.

Mr MICHAEL HODGMAN - You have not answered my question yet. You have to move that the bill be read a second time, but I want an assurance on the matter that I have raised with you, sir.

Mr KONS (Braddon - Secretary to Cabinet) - I will reply now to some of those comments and the others we will deal with in committee.

In relation to the honourable Mr Hodgman's comment, when a debt is in dispute I am advised that the debt is not passed on to a debt-collection agency. Generally, only long-term outstanding debts are passed on to debt-collection agencies where internal recovery procedures have failed.

One of the other issues, raised by the honourable member for Bass, Mr Gutwein, about the method of calculation; if you need further clarification on that we will do that as part of the committee stage.

Payroll tax changes and a broadening of the tax base: the intent was that all those payments would be grossed up and reduced through the method of calculation which Treasury provided to the honourable member earlier. I will discuss that in the committee stage.

Mortgagee in possession was the subject of another question. The Commissioner may recover any unpaid land tax from any mortgagee in possession. The commissioner would only exercise his discretion in extenuating circumstances which would be considered on a case-by-case basis. Any amount recovered from a mortgagee in possession would relate to the amount required to be paid under section 39 of the Land Tax Act which details the apportionment of outstanding debt in cases of owners with multiple land holdings. At present, land tax has to be paid before any land is sold or transferred, therefore before a property can be sold by a mortgagee land tax must be paid. If the owner is not in a position to pay the outstanding land tax it may be difficult for the property to be sold.

Regarding the question by the member, Mr McKim, about winners and losers, undoubtedly there will be, but under the current regime there are winners and losers as well, so in balance it will even itself out.

The other question was about mortgagees in possession. There could be the possibility of that being used as a tax avoidance measure by mortgagees in possession by taking possession of the property, just sitting on the property and not doing very much with it. The discretion is with the commissioner, as mentioned earlier, to exercise the discretionary extenuating circumstances to see whether they recover it from the mortgagee in possession or leave it until a later stage where there would be a sale of the property.

Bill read the second time.