Wednesday, 31 May 2023
Bills
State Taxation Acts Amendment Bill 2023
Bills
State Taxation Acts Amendment Bill 2023
Introduction and first reading
The PRESIDENT (17:43): I have a message from the Assembly:
The Legislative Assembly presents for the agreement of the Legislative Council ‘A Bill for an Act to amend the Duties Act 2000, the Fire Services Property Levy Act 2012, the Land Tax Act 2005, the Payroll Tax Act 2007, the Planning and Environment Act 1987, the Subdivision Act 1988, the Taxation Administration Act 1997 and the Valuation of Land Act 1960 and for other purposes’.
That the bill be now read a first time.
Motion agreed to.
Read first time.
Ingrid STITT: I move, by leave:
That the second reading be taken forthwith.
Motion agreed to.
Statement of compatibility
Ingrid STITT (Western Metropolitan – Minister for Early Childhood and Pre-Prep, Minister for Environment) (17:44): I lay on the table a statement of compatibility with the Charter of Human Rights and Responsibilities Act 2006:
In accordance with section 28 of the Charter of Human Rights and Responsibilities Act 2006 (Charter), I make this Statement of Compatibility with respect to the State Taxation Acts Amendment Bill 2023.
In my opinion, the State Taxation Acts Amendment Bill 2023 (Bill), as introduced to the Legislative Council, is compatible with the human rights as set out in the Charter. I base my opinion on the reasons outlined in this Statement.
Overview
This Bill introduces a number of budget measures, and makes technical amendments to the Duties Act 2000 (Duties Act), the Fire Services Property Levy Act 2012 (FSPL Act), the Land Tax Act 2005 (Land Tax Act), the Payroll Tax Act 2007 (Payroll Tax Act), the Planning and Environment Act 1987 (Planning Act), the Subdivision Act 1988 (Subdivision Act), the Taxation Administration Act 1997 (Taxation Administration Act) and the Valuation of Land Act 1960 (Valuation of Land Act).
Many of the amendments made by the Bill do not engage the human rights listed in the Charter because they either do not affect natural persons, or they operate beneficially in relation to natural persons.
Human rights issues
The rights under the Charter that are relevant to the Bill are recognition and equality before the law, the right to property, the right to fair hearing and the right to protection from retrospective criminal laws.
Recognition and equality before the law: section 8(3)
Section 8(3) of the Charter provides that every person is equal before the law and is entitled to the equal protection of the law without discrimination. Discrimination, under section 6 of the Equal Opportunity Act 2010, includes discrimination on the basis of race, which is defined to include differentiation based on a person’s nationality or national origin.
Clauses 27 to 33, 39 and 41 of the Bill increase the tax rate for absentee owners of land by 2% from the 2024 land tax year. Clause 39 of the Bill also lowers the tax-free threshold for absentee owners of land (other than trustees of trusts) from $300,000 to $50,000 from the 2024 land tax year.
The Charter implications of the original absentee owner surcharge provisions were addressed in the Statement of Compatibility accompanying the State Taxation and Other Acts Amendment Bill 2015. The Bill may engage the section 8(3) rights of natural person absentees because these amendments differentiate between taxpayers’ liability on the basis of a person’s nationality. However, any limitation on those rights would be reasonable and justified in accordance with section 7(2) of the Charter because the amendments are directed to implementing the underlying purpose of collecting surcharge rates of land tax from absentee owners of land. Differential treatment of foreign natural persons is central to the policy intent, which is to improve housing affordability for Victorians and to fund vital infrastructure by increasing the cost of holding land for foreign persons in the Victorian residential housing market.
Right to property: section 20
Section 20 of the Charter provides that a person must not be deprived of his or her property other than in accordance with law. This right is not limited where there is a law that authorises a deprivation of property, and that law is adequately accessible, clear and certain, and sufficiently precise to enable a person to regulate their conduct.
Duties Act amendments
Division 1 of Part 2 of the Bill inserts provisions into the Duties Act to allow for the taxation of corporate collective investment vehicles (CCIVs) on an equivalent basis to the taxation of trusts under that Act. The right to property may be engaged by these amendments where natural persons are members of CCIV sub-funds and become liable to duty in that capacity.
Division 3 of Part 2 of the Bill replaces the current eligible pensioner exemption/concession with a new eligible cardholder exemption/concession. The right to property may be engaged by these amendments as natural persons may be required to pay duty or an increased amount of duty where currently an exemption or higher concession applies.
To the extent that people’s property rights are affected by the above amendments to the Duties Act, any limit is in accordance with the law, which is clearly articulated, not arbitrary, and sufficiently precise to enable affected natural person taxpayers to inform themselves of their legal obligations and to regulate their conduct accordingly. Any deprivation of property arising from the payment of duty under the CCIV amendments is further justifiable since these provisions are anti-avoidance in nature.
FSPL Act amendments
Clauses 23 and 24 of the Bill contain amendments to the refund and cancellation provisions of the FSPL Act to expressly preclude refund/cancellation requests the basis for which is a ground of objection under the Valuation of Land Act. To the extent that natural persons may overpay FSPL on the basis of an incorrect valuation and do not pursue an objection under the Valuation of Land Act, the right to property may be engaged. Any deprivation of property arising from limiting the grounds on which a refund may be issued, or an FSPL assessment cancelled, is justifiable since those affected remain entitled to dispute FSPL liabilities under the Valuation of Land Act. Further, the measures are designed to prevent revenue leakage and promote certainty of revenue that funds Victoria’s firefighting services.
To the extent that people’s property rights are affected, any limit is in accordance with the law, which is clearly articulated, not arbitrary, and sufficiently precise to enable affected natural person taxpayers to inform themselves of their legal obligations and to regulate their conduct accordingly.
Land Tax Act amendments
Division 1 of Part 4 of the Bill inserts provisions into the Land Tax Act to allow for the taxation of CCIVs on an equivalent basis to the taxation of trusts under that Act. The right to property may be engaged by these amendments where natural persons are members of CCIV sub-funds and become liable to land tax in that capacity.
Clauses 27 to 32, 39 and 41 of the Bill increase the tax rate for absentee owners of land by 2% from the 2024 land tax year. Clause 39 of the Bill also lowers from the 2024 land tax year the tax-free threshold for absentee owners of land (other than trustees of trusts) from $300,000 to $50,000. These amendments affect natural persons who will be required to pay land tax at a higher rate, and from a lower threshold, than that which currently applies and as such the right to property may be engaged.
Clause 35 of the Bill temporarily lowers the tax-free threshold for owners of land (other than absentee owners and/or trustees of trusts) from $300,000 to $50,000 from the 2024 land tax year, for a period of 10 years. It also temporarily increases the rate of tax payable by those owners with total taxable land of $300,000 or more. The right to property may be engaged as natural persons will become liable to land tax at a lower threshold where previously they were not so liable or will be required to pay land tax at a higher rate than that which currently applies.
Clauses 37 and 41 of the Bill temporarily increase the rate of land tax payable by trustees of trusts who own land with a total taxable value of $50,000 or more from the 2024 land tax year, for a period of 10 years. The right to property may be engaged as natural persons may be required to pay land tax at a higher rate than that which currently applies.
To the extent that people’s property rights are affected by the above amendments to the Land Tax Act, any limit is in accordance with the law, which is clearly articulated, not arbitrary, and sufficiently precise to enable affected natural person taxpayers to inform themselves of their legal obligations and to regulate their conduct accordingly. Any deprivation of property arising from the payment of land tax under the CCIV amendments is further justifiable since these provisions are anti-avoidance in nature.
Payroll Tax Act amendments
Clause 58 of the Bill corrects an omission in the Payroll Tax Act to specify the annual rate of payroll tax for the 2022–23 and subsequent financial years. To the extent that natural person employers will no longer be able to exploit a drafting error to avoid paying annual payroll tax, people’s property rights may be affected. However, any limit is in accordance with the law, which is clearly articulated, not arbitrary, and sufficiently precise to enable affected natural person taxpayers to inform themselves of their legal obligations and to regulate their conduct accordingly.
Planning Act amendments
Division 1 of Part 6 of the Bill amends the Planning Act to clearly impose the Growth Areas Infrastructure Contribution (GAIC) on the certification of a plan of subdivision under section 35 of the Subdivision Act. To the extent that natural person landowners can no longer use subdivision technicalities to avoid a liability to GAIC, the right to property may be engaged.
Clauses 102 and 103 of the Bill correct anomalies in the Planning Act to provide that, following subdivision of a parent lot, GAIC is apportioned to child lots on the proportionate area of the child lot to the parent lot, excluding land outside the contribution area. To the extent that natural person landowners may no longer be able to take advantage of technicalities in the apportionment provisions to avoid a liability to GAIC, the right to property may be engaged.
Any deprivation of property under these amendments to the Planning Act is justifiable since these provisions are anti-avoidance in nature. To the extent that people’s property rights are affected, any limit is in accordance with the law, which is clearly articulated, not arbitrary, and sufficiently precise to enable affected natural person taxpayers to inform themselves of their legal obligations and to regulate their conduct accordingly.
Taxation Administration Act and Valuation of Land Act amendments
Clause 108 of the Bill amends the objection provisions of the Taxation Administration Act such that an objection to either of the two valuations on which a windfall gains tax (WGT) assessment is based will be taken as an objection to both relevant valuations. In addition, clause 109 of the Bill amends the Valuation of Land Act to provide that an objection to either of the two valuations on which a WGT assessment is based will be taken as an objection to both relevant valuations.
To the extent that natural person landowners will not be able to manipulate valuation objections to minimise their WGT liability, the right to property may be engaged. Any deprivation of property arising from these amendments is justifiable as they are anti-avoidance measures. To the extent that people’s property rights are affected, any limit is in accordance with the law, which is clearly articulated, not arbitrary, and sufficiently precise to enable affected natural person taxpayers to inform themselves of their legal obligations and to regulate their conduct accordingly.
Clause 110 of the Bill includes amendments to give councils discretion whether to adopt any amended valuations that result from a WGT valuation objection. These amendments may engage the right to property in circumstances where a natural person landowner overpays council rates on the basis of a valuation which is later found to be overstated for WGT purposes, and the relevant council declines to issue an amended rates notice reflecting the revised value. Any deprivation of property arising from these amendments is justifiable as the purpose of the amendments is to ensure revenue certainty and promote efficiency for municipal councils by ensuring that that WGT objections do not place an undue burden on councils. Aggrieved landowners remain entitled to contest property valuations for council rates purposes under the Valuation of Land Act.
Right to fair hearing: section 24
The right to a fair hearing as protected under section 24 of the Charter provides that a person charged with a criminal offence or a party to a civil proceeding has the right to a fair hearing. The right to a fair hearing applies to both courts and tribunals, such as the Victorian Civil and Administrative Tribunal. Generally, the right to a fair hearing is concerned with procedural fairness and access to a court or tribunal, rather than the substantive fairness of a decision of a court or tribunal determined on the merits of a case.
FSPL Act amendments
Clauses 23 and 24 of the Bill contain amendments to the refund and cancellation provisions of the FSPL Act to expressly preclude refund/cancellation requests the basis for which is a ground of objection under the Valuation of Land Act. To the extent that section 24 of the Charter is engaged and limited by these provisions, I am satisfied that any such limit would be demonstrably justified. These amendments have been introduced to prevent landowners from using alternative pathways to the objections process set out in the Valuation of Land Act to contest land valuations for FSPL purposes and in particular to prevent the circumvention of the strict timeframes set out in the Valuation of Land Act. Any limit on the right to fair hearing by this amendment is justified as it is a revenue protection measure intended to prevent revenue leakage and promote revenue certainty. Aggrieved landowners remained entitled to contest property valuations for FSPL purposes under the Valuation of Land Act.
Planning Act amendments
Division 2 of Part 6 of the Bill abolishes the GAIC Hardship Relief Board (Board). To the extent natural person landowners will no longer be able to seek GAIC relief from the Board, the right to fair hearing may be engaged. However, I am satisfied that any limit would be demonstrably justified. These amendments eliminate unnecessary regulation and administrative burdens and promote government efficiency. Under the amendments, natural person landowners will be able to seek GAIC relief on financial hardship grounds from the Governor in Council instead of the Board.
Taxation Administration Act and Valuation of Land Act amendments
Clause 108 of the Bill amends the objection provisions of the Taxation Administration Act such that an objection to either of the two valuations on which a WGT assessment is based will be taken as an objection to both relevant valuations. In addition, clause 109 of the Bill amends the Valuation of Land Act to provide that an objection to either of the two valuations on which a WGT assessment is based will be taken as an objection to both relevant valuations.
To the extent that section 24 of the Charter is engaged and limited by these provisions, I am satisfied that any such limit would be demonstrably justified. These amendments have been introduced to prevent landowners from manipulating the objections process to minimise their liability to WGT. Any limit on the right to fair hearing by this is justified as a revenue protection measure intended to prevent tax leakage and avoidance activity. Aggrieved landowners remained entitled to contest property valuations for WGT purposes under the Taxation Administration Act, albeit that both relevant values will be reviewed.
Clause 110 of the Bill includes amendments to the Valuation of Land Act to give councils discretion whether to adopt any amended valuations that result from a WGT valuation objection. To the extent that section 24 of the Charter is engaged and limited by these provisions, I am satisfied that any such limit would be demonstrably justified. These amendments have been introduced to ensure revenue certainty and promote efficiency for municipal councils by ensuring that WGT objections do not place an undue burden on councils. Aggrieved landowners remain entitled to contest property valuations for council rates purposes under the Valuation of Land Act.
Retrospectivity: section 27
Section 27 of the Charter is concerned with the retrospective operation of criminal laws. It provides that a person has the right not to be prosecuted or punished for things that were not criminal offences at the time they were committed.
Payroll Tax Act amendments
Clause 58 of the Bill corrects an omission in the Payroll Tax Act to specify the annual rate of payroll tax for the 2022–23 and subsequent financial years. The proposed amendment is to take effect retrospectively from 1 July 2022 to confirm the annual payroll tax rates that apply for the 2022–23 and subsequent financial years.
The provisions being inserted into the Payroll Tax Act do not amend any criminal laws and therefore section 27 of the Charter is not engaged. In any event, the retrospective operation of clause 58 is necessary to correct a drafting anomaly by which monthly payroll tax is imposed but an annual rate is not specified for the 2022–23 financial year. Importantly, clause 58 of the Bill does not in practice operate to impose payroll tax retrospectively. For the 2022–23 financial year, employers are already under a legislated obligation to pay payroll tax on a monthly basis at the relevant rate. The amendments only affect the annual rate of payroll tax which is relevant to the annual reconciliation completed after the end of the financial year, i.e. after 30 June 2023 in respect of the 2022–23 financial year, and part-year reconciliations where an employer has not employed for the full financial year.
For these reasons, in my opinion, the provisions of the Bill are compatible with the rights contained in sections 8(3), 20, 24 and 27 of the Charter.
The Hon. Jaclyn Symes
Attorney-General
Minister for Emergency Services
Second reading
That the bill be now read a second time.
Ordered that second-reading speech be incorporated into Hansard:
I am pleased to introduce this Bill, which amends the Duties Act 2000, Fire Services Property Levy Act 2012, Land Tax Act 2005, Payroll Tax Act 2007, Planning and Environment Act 1987, Subdivision Act 1988, Taxation Administration Act 1997 and Valuation of Land Act 1960 to ensure that these Acts remain consistent with their underlying policy intent.
This Bill delivers 2023–24 budget initiatives and amends several laws to ensure they support fair and effective revenue administration.
COVID Debt Repayment Plan – COVID Debt Levy
The Government’s Covid Debt Repayment Plan, which aims to offset debt incurred assisting Victorians through the COVID-19 pandemic, contains a temporary and targeted levy that will apply for 10 years, expiring on 30 June 2033, with two components.
Firstly, the Bill will introduce a new payroll tax surcharge that will apply to employers who pay wages of $10 million or more nationally. A rate of 0.5 per cent will apply for businesses with national payrolls above $10 million, and businesses with national payrolls above $100 million will pay an additional 0.5 per cent. The additional rates will be paid on the Victorian share of wages above the relevant threshold. This surcharge is expected to raise $836 million in 2023–24 and is projected to raise around $1 billion a year by the end of the forward estimates.
Secondly, the Bill will reduce the general rates land tax-free threshold to $50,000. In addition, it will impose land tax surcharges and increase current land tax rates by imposing a temporary flat surcharge of $500 on general taxpayers with landholdings between $50,000 and $100,000 and a temporary flat surcharge of $975 on general taxpayers with landholdings between $100,000 and $300,000. Trust rates will increase in a consistent manner. For general taxpayers with landholdings over $300,000 (and trust taxpayers with landholdings above $250,000), land tax rates will temporarily increase by 0.1 per cent of the value of landholdings above $300,000, in addition to the $975 temporary flat surcharge. Following the conclusion of the applicable 10-year period on 30 June 2033, these changes will be reversed.. It is estimated that the increased land tax rates will raise an additional $4.7 billion in revenue over the budget and forward estimates.
Better business tax
To support the growth of the Victorian economy, the Bill will gradually abolish business insurance duties (which apply to public and product liability, professional indemnity, employers’ liability, fire and industrial special risks, and marine and aviation insurance) by reducing the applicable duty rate by 1 per cent per annum over a 10-year period commencing from 1 July 2024. Duty on business insurance will therefore be abolished by 2033 and will result in the reduction of insurance duty revenue received over the budget forward estimates period by more than $275 million.
To further support Victorian small businesses, the Bill will increase the payroll tax-free threshold from $700,000 to $900,000 from 1 July 2024, and subsequently increase further to $1,000,000 from 1 July 2025. Around 6,000 businesses, who otherwise would have paid payroll tax, will stop paying when the threshold reaches $1 million. More than 26,000 small businesses will benefit from the Government increasing the tax-free threshold to $1 million. The Bill will also introduce a ‘phase out’ of the allowable deduction for payroll tax for businesses who pay wages over $3 million. The Payroll Tax Act 2007 (PTA) currently allows a deduction based on the tax-free threshold to be subtracted from Victorian taxable wages in determining the amount of payroll tax payable. The allowable deduction is adjusted on a pro-rata basis in accordance with the proportion of the employer’s total Australian wages that are taxable wages and partly adjusted for employers who pay wages for part of a financial year. Under the ‘phase out’, businesses who pay wages between $3,000,000 and $5,000,000 will receive a progressively smaller deduction resulting in proportionately more payroll tax payable. Businesses who pay wages over $5 million will not be eligible for the deduction in payroll tax on their taxable wages. This measure will commence from 1 July 2024 to give businesses time to adjust their operations to the new payroll tax framework and is expected to cost around $62 million over the budget and forward years.
Revenue measures
The Bill will limit the existing payroll tax exemption applying to non-government schools to low-fee non-government schools as declared by the Minister for Education with the consent of the Treasurer. The PTA currently exempts from payroll tax, wages paid by not-for-profit non-government schools as defined by the Education and Training Reform Act 2006 (ETRA), provided those wages are paid to people in relation to the provision of education within that school. In practice, this has the effect of exempting all non-government schools in Victoria from payroll tax. Under this budget measure, declared schools will be eligible for the exemption from payroll tax and non-declared schools would be liable to pay payroll tax and additional surcharges where their taxable wages exceed the tax-free threshold. This initiative will align the payroll tax treatment of high-fee non-government schools with that of government schools and ensure the benefit of this exemption only flows to schools that need support. Approximately 110 schools, or around the top 15 per cent by fee level, will lose their exemption. This measure is proposed to commence from 1 July 2024 and is expected to generate $422 million across the budget and forward years.
The Bill increases the absentee owner land tax surcharge rate from 2 per cent to 4 per cent cent to align with the rate in New South Wales. The Bill will also decrease the minimum threshold for non-trustee absentee owners from $300,000 to $50,000. This means the surcharge will be payable if the total taxable value of Victorian land held by a non-trust absentee owner is equal to or exceeds $50 000. There will be no change to the minimum threshold for trust taxpayers. These measures ensures that foreign property owners continue to contribute towards the provision of government services and infrastructure in Victoria, to the ultimate benefit of all Victorian property owners. This measure is expected to generate around $1.2 billion in revenue over the budget and forward estimates.
Support measures
To support those impacted by builder insolvencies, the Bill will provide the Commissioner of State Revenue with the discretion to extend the existing land tax exemption for principal places of residence under construction or renovation by up to an additional two years effective from the 2024 land tax year. The Land Tax Act 2005 (LTA) currently contains a principal place of residence exemption for land which is unoccupied and contains a residence which is under construction or renovation. The current exemption applies from the commencement date of construction or renovation and is available for a maximum of four tax years after the year in which construction or renovation commenced. This measure, commencing the day after Royal Assent, will provide the Commissioner of State Revenue with discretion to extend the exemption period by up to an additional two years where further time is required to complete construction due to builder insolvency. It is estimated the extension of the principal place of residence exemption will reduce land tax revenue by approximately $2.4 million over the budget and forward estimates.
The Bill will introduce a number of land tax and transfer duty relief measures to provide further support to families providing housing to family members facing severe disabilities. Firstly, the Bill amends the Duties Act 2000 (the Duties Act) to increase the special disability trust (SDT) deduction threshold from $500,000 to $1,500,000 for transfers of dutiable property to the trustee of an SDT, but only where the property is to be used as the principal place of residence of the principal beneficiary of the SDT. Secondly, the Bill will introduce an exemption from duty for transfers of property from immediate family members for no consideration to a qualifying person with a disability which is to be used as the principal place of residence of that qualifying person. Currently, duty exemptions are available to families who establish an SDT for the purposes of providing accommodation and housing to family members who suffer from a severe disability. However, costs and complexities associated with establishing and operating an SDT have been onerous and prohibitive for some families. This measure will provide a similar duty exemption, without the requirement to establish an SDT, provided the qualifying person with a disability meets certain residency requirements and the dutiable value of the property does not exceed $1,500,000. Thirdly, the Bill will also introduce a land tax exemption for land used as the home of an individual eligible to be the beneficiary of an SDT, even in the absence of an established SDT, provided there is no consideration or rent provided. The duties exemption and the land tax exemption will apply on the basis that the person with a disability meets the impairment and disability conditions of the beneficiary requirements of an SDT under the Social Securities Act 1991 (Cth) or Veterans’ Entitlements Act 1986 (Cth) and meets other PPR exemption criteria. Collectively, these measures will assist people to provide long-term housing solutions for immediate family members with severe disabilities and are expected to reduce tax revenue by approximately $5.4 million over the budget and forward estimates.
The Bill will assist pensioners and other concession card holders by increasing the land transfer duty exemption and concession threshold from $330,001 and $750,000, to $600,001 and $750,0000. Accordingly, a full exemption from duty will be available for dutiable property that is below $600,000 rather than $330,000, provided that an eligible pensioner acquires an interest of 25 per cent or more and satisfies a residency requirement. Separately, if an eligible pensioner purchases a share or an interest in a property, the exemption and concession thresholds are currently assessed against the dutiable value of the fractional interest of the eligible pensioner, rather than the dutiable value of the whole property. The new measure will therefore be aligned with the first home buyer exemption and concession and improve fairness by assessing eligibility on the total value of the purchase, rather than on the fractional interest of the eligible pensioner. The proposed amendments are to have effect to contracts entered into from 1 July 2023.
The Bill will also introduce a new land tax exemption for land protected by a conservation covenant entered into with Trust for Nature, commencing from 1 January 2024. A conservation covenant is a voluntary legal agreement made between a private landowner and Trust for Nature that binds the landowner as to the development or use or the conservation of land subject to the covenant. The new land tax exemption will therefore support landowners to protect the conservation value of the land and is estimated to reduce land tax revenue by approximately $3.1 million over the budget and forward estimates.
General taxation amendments
The Bill makes several amendments to Victoria’s laws that will clarify their operation, correct drafting defects and remove anomalies that disadvantage taxpayers.
Corporate collective investment vehicles
The Bill will amend the Duties Act 2000, Land Tax Act 2005 and Payroll Tax Act 2007 to address the corporate collective investment vehicle (CCIV) reforms recently made by the Australian Government. CCIVs were established as a new fund management entity, intended to be an alternative structure to the existing trust-based management investment scheme to increase the competitiveness of Australia’s managed fund industry and attract foreign investment. A CCIV is a company limited by shares, thus a single legal entity with all assets, liabilities and businesses of a CCIV assigned to one or more segregated sub-funds. Each sub-fund has its own set of members, who are at law shareholders of the CCIV, however the sub-funds do not have separate legal personality and no trust relationship is created between the CCIV and the members of a sub-fund in respect of the property held in that sub-fund. As CCIVs are brand new entities, existing Victorian taxation legislation views a CCIV as a single legal person and the sole legal and beneficial owner of all land across the CCIV’s sub-funds.
The Bill amends the Duties Act 2000 and the Land Tax Act 2005 to deem each sub-fund of a CCIV as equivalent to a separate unit trust scheme for duties and land tax purposes. Under this approach, CCIVs would be regulated and taxed as if they were trustees; property of the sub-funds would be treated as trust property, and the members of each sub-fund would be treated as beneficiaries/unit holders. Consequential amendments to the Duties Act 2000 will also ensure the principle that each sub fund is deemed to be equivalent to a unit trust scheme is carried throughout each Act. The Bill will amend the Payroll Tax Act 2007 to exclude amounts paid or payable by a CCIV to its corporate director as wages for payroll tax purposes. This is intended to prevent payroll tax from applying to payments from the CCIV to its corporate director.
Fire services property levy
The Bill amends the refund and cancellation provisions under the Fire Services Property Levy Act 2012 (the FSPL Act) in response to the Victorian Court of Appeal case of Valuer General (Vic) v AWF Prop Co 2 Pty Ltd [2021] VSCA 274 (the AWF Decision). The refund and cancellation provisions under the FSPL Act allows collection agencies to refund or cancel payments for mistakes, such as duplicated payments or mathematical errors. In the AWF Decision, the Ararat Rural City Council sent notices to an operator (being the lessee of land) with Capital Improved Values calculated on the assumption that the wind turbines connected to underground foundations were fixtures forming part of the land. The Court subsequently held that the fixtures did not form part of the land and should be excluded from the hypothetical fee simple estate to be valued by a valuation authority for FSPL and rates purposes. Following the AWF Decision, several wind farm operators have made refund requests under the refund and cancellation provisions in respect of historical FSPL paid. However, these provisions were not intended to provide a person aggrieved by a valuation with an alternative avenue to dispute amounts paid if they were otherwise too late to lodge an objection under the Valuation of Land Act 1960 (VLA). Accordingly, the Bill will amend the refund and cancellation provisions to expressly carve out overpayments/errors, the basis for which is a ground of objection under the VLA. These amendments will ensure consistency between the refund and cancellation provisions in the FSPL Act and will adequately reflect the policy intent of the statutory scheme.
The Bill will make a minor amendment to the PTA to correct the omission of annual payroll tax rates being in place for the 2022–23 financial year and subsequent financial years in respect of regional employers and bushfire relief regional employers. The Bill will therefore amend the PTA by inserting the words ‘or any subsequent financial year’, in clause 1 of Schedule 1. This amendment will ensure that the annual payroll tax rates will apply for the financial year commencing 1 July 2021 continue to apply for the 2022–23 and future financial years, as was always intended.
Growth areas infrastructure contribution
The Bill abolishes the Growth Areas Infrastructure Contribution (GAIC) Hardship Relief Board in line with the recommendations of the Commissioner for Better Regulation. Section 201TE of the Planning and Environment Act (PE Act) empowers the Governor in Council to, on the recommendation of the Minister for Planning, grant a reduction of or exemption from GAIC liability in exceptional circumstances. The Bill will amend this to include financial hardship as an exceptional circumstance, which will provide an alternative means for landowners to seek relief from GAIC liability.
The Bill also closes a loophole in the GAIC provisions of the PE Act and its interaction with section 35 of the Subdivision Act 1988. The current framework enables developers to excise land for public purposes early and prior to GAIC being triggered, with the result being that GAIC liabilities on these parcels are never realised to state revenue, or are imposed on local government and other government agencies. Use of the section 35 loophole means that councils and other acquiring authorities were acquiring land with a GAIC liability on title which becomes a financial risk for them. This amendment introduces a new GAIC event, being the certification of a non-statement of compliance subdivision to ensure that any GAIC liability on land which is subdivided through section 35 of the Subdivision Act 1988 is paid prior to transfer to an acquiring authority. This removes the financial risk and burden from councils and other municipal authorities and provides that GAIC continues to apply to all land within the contribution area on a broad hectare basis, as intended by GAIC policy.
The Bill also amends the PE Act to prevent GAIC from being apportioned from a parent lot to any child lot wholly outside the contribution area, where the parent lot is partly inside and outside the contribution area. This can lead to the apportionment of GAIC to a child lot that is not within the contribution area, or allocate a child lot that is partially outside the contribution area with a greater GAIC liability that it should otherwise be liable to. To prevent this unintended outcome, the Bill will amend the PE Act to provide that GAIC is apportioned to child lots based on the proportionate area of the child lot to the parent lot, excluding land outside the contribution area.
The Bill rectifies the unintended consequences of an earlier amendment to the Duties Act which aimed to close a loophole relating to acquisition of economic entitlements. This had the effect of triggering a GAIC liability at the time a person enters into an agreement with a landowner where the profits of the development of the land are split, but the title to the property remains with the original landowner. This brought forward the requirement to pay GAIC much earlier in the development cycle, and while a triggered liability can be deferred, it attracts interest from the time it is triggered, resulting in a higher liability than would have ordinarily been incurred. The Bill ensures that acquisition of economic entitlements becomes an excluded event. The Bill also includes a range of minor and technical amendments to ensure the Act is consistent with changes that have occurred in recent years to the Duties Act. Collectively, these amendments to GAIC will come into operation on the day after the day on which this Act receives the Royal Assent.
The Bill will also amend the Taxation Administration Act 1997 and VLA to clarify the scope of objections lodged to valuations of land used in an assessment of Windfall gains tax (WGT). The WGT was legislated in the WGT Amendment Act and will come into operation from 1 July 2023, which will apply to land subject to a rezoning decision that results in a land value uplift of more than $100,000. Value uplift is calculated as V2 minus V1, where V2 relates to the capital improved value in a post-rezoning supplementary valuation undertaken by the Valuer-General Victoria (Valuer-General) and V1 relates to the capital improved value in a pre-rezoning valuation of the land. Under the current WGT regime, landowners may object to either or both valuations and the Valuer-General can only consider and adjust a valuation which the owner has objected to. An owner could therefore manipulate the value uplift on which WGT is calculated by objecting to only one of the valuations. Changes to the amendments to the Taxation Administration Act 1997 and VLA in the WGT Amendment Act are proposed so that an objection to either V1 or V2 is taken as an objection to both V1 and V2. This would empower the Valuer-General to consider grounds of objection for both valuations and adjust either or both as part of determining the objection’s outcome, if appropriate. In addition, the VLA is proposed to be amended (via the WGT Amendment Act) to give councils discretion whether to adopt any amended valuations that result from a WGT valuation objection. This ensures councils are not required to issue a secondary rate notice every time that a WGT objection leads to an adjusted value, such as in cases where the adjustment is minor, or substantial time has elapsed before the amended notice of valuation is issued. These amendments are proposed to take effect from the day after Royal Assent to be in place when the WGT commences on 1 July 2023.
I commend the Bill to the house.
Georgie CROZIER (Southern Metropolitan) (17:45): I move, on behalf of my colleague Dr Bach:
That debate on this bill be adjourned for one week.
Motion agreed to and debate adjourned for one week.