Talking Tax – Issue 67

Insights6 Mar 2017

State Revenue Legislation Amendment Bill 2017

The State Revenue Legislation Amendment Bill was introduced into New South Wales Parliament on 23 February 2017. According to the explanatory note, the Bill proposes to amend several Acts to give effect to duty, payroll tax, and land tax reforms. The amendments to the Duties Act 1997 (NSW) (Duties Act) include a suite of substantive changes to:

clarify the application of the Duties Act to instruments that are in digital form
charge nominal (rather than ad valorem) duty on certain transfers of property to the custodian of a trustee of a self-managed superannuation fund
provide an exemption from duty that would otherwise arise upon the vesting of land upon the merger of credit unions or authorised deposit-taking institutions with mutual structures
extend the duty exemptions applying to the break-up of marriages and de facto relationships to cover such transfers to trustees under the Bankruptcy Act 1966 (Cth)
extend an existing anti-avoidance measure, which ensures that certain land holdings transferred from a unit trust scheme or company within 12 months of a person acquiring an interest in the scheme or company are counted when determining whether the scheme or company is a landholder, so that the measure covers agreements for the sale or transfer of land holdings
prevent the use of combined put and call options rather than a sale or transfer agreement for the avoidance of liability for landholder duty
extend the current duty exemptions for transfers of primary production land between family members to capture transfers from self-managed superannuation funds where a member of the fund and the person to whom the land is transferred are family members
exempt from duty, any transfers of property between superannuation funds required in compliance with the Commonwealth’s MySuper reforms
extend the circumstances in which a trustee and another trustee, a natural person and a trustee, and a private company and a trustee are treated as being “associated” for the purposes of a liability to duty, by tracing through to sub-trusts and
make further provisions:
- for the application of the test to determine the amount of duty that a person is liable to pay as a result of a tax avoidance scheme that is of an artificial, blatant or contrived nature
- to prevent a person who enters into an agreement to purchase shares or units in a landholder opting to defer registration of the purchase to avoid landholder duty
- relating to the aggregation of interests acquired by a person in a landholder to determine liability for landholder duty and
- relating to tracing interests through linked entities of a unit trust scheme or company to determine whether the entity is a landholder.

The Bill also proposes to amend the Land Tax Management Act 1956 (NSW) to impose obligations on Government entities who lease land to disclose to the lessee in writing if they will be liable for land tax under section 21C. The lessee will generally be liable for land tax under section 21C as if it were the owner of the land where the land is leased from the Government.

This obligation on Government entity has a significant practical effect if it fails to make the prescribed disclosure. In those circumstances, the Chief Commissioner of State Revenue can recover the unpaid tax from the Government entity, who is made joint and severally liable.

Commercial Passenger Vehicle Industry Bill 2017

The Commercial Passenger Vehicle Industry Bill 2017 (Bill) was introduced into the Victorian Parliament on 22 February 2017. The Bill is part of the State Government’s reform of the commercial passenger vehicle industry to provide broader legislative compliance activities to taxis and rideshare participants.

According to the explanatory memorandum, the Bill proposes to amend the current Transport (Compliance and Miscellaneous) Act 1983 (Vic) to:

remove financial barriers for entry into the commercial passenger vehicle industry by removing the requirement for industry participants to pay significant licence fees and
establish a legislative framework needed to support the implementation of a mandatory $2 levy for each trip in respect of commercial passenger vehicle services (Levy).

The reforms will apply to all participants in the commercial passenger vehicle industry, including not only taxis and other hire car services, but also rideshare services.

Removing licence fees

The Bill removes the annual licence fees for taxi-cabs and other hire car services. While the reforms require vehicles, including rideshare vehicles, to be licenced to provide their services, it is proposed that the licencing fees will not be prohibitive for industry participants that are currently unable to pay the annual fee.

This measure, in conjunction with the Levy, is intended to create greater competition and fairness within the commercial passenger vehicle industry.

Commercial Passenger Vehicle Service Levy

The Levy would be payable on each trip undertaken for a single fare, and payable to the Commissioner of State Revenue (Commissioner) within 30 days of each financial quarter. Administration and enforcement of the Levy by the Commissioner would operate in accordance with the Commissioner’s powers under the Tax Administration Act 1997 (Vic). In addition, it will be an offence for a taxpayer to fail to keep proper records in relation to the Levy.

Increasing Transparency of the Beneficial Ownership of Companies Consultation Paper

The Australian Government has released a consultation paper on Increasing Transparency of the Beneficial Ownership of Companies and a corresponding media release.

The consultation paper comes in the context of a global push for great transparency surrounding the beneficial ownership of underlying assets and related information, and is a step in Australia’s first Open Government National Action Plan.

The current regime

While the Corporations Act 2001 (Cth) (Corporations Act) requires every non-listed company to record in its register of members whether shares are held beneficially, there is currently no legal obligation for companies to collect or record the identity of beneficial owners. The register must record each member’s name, address and date of entry to the register. Proprietary companies with more than 20 members are required to inform the Australian Securities and Investments Commission (ASIC) of the top 20 members in each share class, which includes whether the shares are held beneficially. For listed companies, disclosure obligations arising under Chapter 6C of the Corporations Act apply to beneficial owners of shares.

Measures to increase transparency

By increasing the transparency of the beneficial ownership in companies, tax authorities will be better placed to determine what shares are held on trust and the identification of the trustee having regard to whether the trustee is an individual or company.

However, the consultation paper proposes to extend transparency measures to natural persons that are deemed to be beneficial owners of share when natural persons have a controlling interest in a company. The intention is to capture:

natural persons who may control the legal person through direct and indirect ownership interests
natural persons who may control the legal person through other means and
natural persons who may exercise control through positions held within a legal person, other than as a shareholder.

The consultation paper also suggests that the definitions of associates, relevant interests and substantial shareholders under the Corporations Act be incorporated into the concept of control.

The consultation paper suggests two methods for the collection and storage of beneficial ownership information, being:

regulatory authorities rely on each company’s internal register of members details of beneficial ownership and
the operation of a central register (potentially operated by ASIC, the Australian Business Register or a private operator), using a similar model to the UK, which has its own specific requirements for testing control and underlying beneficial ownership in companies.

The consultation paper proposes to create an additional single database of information that will enable tax authorities to access up-to-date beneficial ownership information relevant to determining whether the taxpayer company or trust have incurred a liability.

Submissions on the consultation paper close 13 March 2017.