Mr REED - 2003-05-27
Madam Speaker, my question is again about the Treasurer’s new land tax. I will give him a specific example to which he can respond. If we have a …
Mr HENDERSON: A point of order, Madam Speaker! There is no new tax in the budget. The Treasurer has said so, and the member is being dishonest.
Madam SPEAKER: Resume your seat. There is no point of order. Good try.
Mr REED: This new tax is land tax, Madam Speaker. I will give the Treasurer a specific example of a mum and dad business worth $1m, and they bring in another partner who wants to invest in the Territory. If the business is worth $1m, currently, isn’t the duty payable 0.6%, equalling some $6000? 0.6% is as far as you got in your last answer, Treasurer.
Mr Stirling: No. That is not true. You have it wrong.
Mr REED: Under your new land tax, Treasurer, will it not be a fact that there will be two duties to be paid: one will be 0.6% on the $400 000 of the business of the $1m, of $2400, and another tax - your new land tax - will be 5.4% of the $600 000 value of the land owned by that business, which equals $30 000, which means that a new investor will have to find $30 000 to invest in the Territory? Is this friendly to business, Treasurer?
ANSWER
Madam Speaker, I will try to be patient. I will take the former Treasurer through this slowly, but it is a bit difficult if you start from the wrong premise, which he has, because he is jumping to conclusions and he does not quite understand. I will take him through it slowly.
What we are trying to do is to ensure that there is equity with direct asset purchases so that big business acquisitions are paid on the same basis as householders. At the moment, we have up to 5.4% duty on a normal direct transfer of land, but only 0.6% if it is indirectly transferred by way of sale of shares or units. The application of the current law is a little unclear, and I give this example: a large hotel purchased at a cost of $15m, raised $480 for the Territory government, whereas $810 000 would have been payable had it been a direct acquisition.
A home buyer pays $6800 on a $200 000 home. It is $3159 for the first home buyer, or $5300 for the principal place of residence. The land rich scheme changes under this 60% land rich test. The current land rich scheme is triggered where they acquire 50% or more - that is, a majority interest - of the shares in the company that is not quoted on the stock exchange, and the company owns land in the Territory valued at $500 000 or more, and all land owned by the company comprises 60% or more in value of its assets. This is the 60% land rich test. This land-holder proposal removes that 60% land rich test in the first place. The 60% threshold will still apply for pre—1 July 2003 acquisitions. There is no change intended retrospectively.
The land rich provisions may be triggered where a person acquires a majority interest - that is 50% or more - of the interest in a company. The duty payable on the same proportion of the value of the company’s land as the proportion of interest acquired - if they purchase 70% of the land holding company, duty will apply to 70% of the value of the land. Majority interests can be acquired through either a single acquisition straight out, or a series of acquisitions made over a period of three years. Additional acquisitions in the company by a person who already holds a majority interest will also be picked up.
Acquisitions of interest in companies or trusts that are quoted on a recognised financial market, such as the Australian Stock Exchange, will continue to be excluded from land rich stamp duty. Land rich stamp duty will apply to a subsequent acquisition of interest, where the entity is unquoted at the time of acquisition and a majority interest has been acquired or increased as a result of that acquisition. For example, if 80% of a company’s shares are acquired when it was quoted, and the remaining 20% is acquired when the company is unquoted, duty will apply to the 20% acquisition unquoted. The current legislation is unclear as to whether the full 100% is subject to duty or no duty is payable.
There is an exception to all of this, and that is the family farm. The Northern Territory has a family pastoral land exemption for direct transfers of pastoral land between family members. This exemption has a number of conditions to prevent abuse. The no consideration party applies to descendants, not ascendants, and includes siblings, de factos and step relations.
The current land rich provisions have exemptions for all primary property, so the exemption has been aligned such that the direct transfer rules apply to land rich transactions. That is the example I have before me, and it is on the record now for you to go back and study. It is a question of equity. Honestly, we do not see it fair that a major company can walk through the Territory and pick up a huge asset, such as a hotel worth $15m, and pay $480 in stamp duty to the Territory, where Joe Punter, when buying the family home is up for - as I said, depending on the purchase price - anywhere between $4000 and $8000. This is not equitable and we will address it.
Mr HENDERSON: A point of order, Madam Speaker! There is no new tax in the budget. The Treasurer has said so, and the member is being dishonest.
Madam SPEAKER: Resume your seat. There is no point of order. Good try.
Mr REED: This new tax is land tax, Madam Speaker. I will give the Treasurer a specific example of a mum and dad business worth $1m, and they bring in another partner who wants to invest in the Territory. If the business is worth $1m, currently, isn’t the duty payable 0.6%, equalling some $6000? 0.6% is as far as you got in your last answer, Treasurer.
Mr Stirling: No. That is not true. You have it wrong.
Mr REED: Under your new land tax, Treasurer, will it not be a fact that there will be two duties to be paid: one will be 0.6% on the $400 000 of the business of the $1m, of $2400, and another tax - your new land tax - will be 5.4% of the $600 000 value of the land owned by that business, which equals $30 000, which means that a new investor will have to find $30 000 to invest in the Territory? Is this friendly to business, Treasurer?
ANSWER
Madam Speaker, I will try to be patient. I will take the former Treasurer through this slowly, but it is a bit difficult if you start from the wrong premise, which he has, because he is jumping to conclusions and he does not quite understand. I will take him through it slowly.
What we are trying to do is to ensure that there is equity with direct asset purchases so that big business acquisitions are paid on the same basis as householders. At the moment, we have up to 5.4% duty on a normal direct transfer of land, but only 0.6% if it is indirectly transferred by way of sale of shares or units. The application of the current law is a little unclear, and I give this example: a large hotel purchased at a cost of $15m, raised $480 for the Territory government, whereas $810 000 would have been payable had it been a direct acquisition.
A home buyer pays $6800 on a $200 000 home. It is $3159 for the first home buyer, or $5300 for the principal place of residence. The land rich scheme changes under this 60% land rich test. The current land rich scheme is triggered where they acquire 50% or more - that is, a majority interest - of the shares in the company that is not quoted on the stock exchange, and the company owns land in the Territory valued at $500 000 or more, and all land owned by the company comprises 60% or more in value of its assets. This is the 60% land rich test. This land-holder proposal removes that 60% land rich test in the first place. The 60% threshold will still apply for pre—1 July 2003 acquisitions. There is no change intended retrospectively.
The land rich provisions may be triggered where a person acquires a majority interest - that is 50% or more - of the interest in a company. The duty payable on the same proportion of the value of the company’s land as the proportion of interest acquired - if they purchase 70% of the land holding company, duty will apply to 70% of the value of the land. Majority interests can be acquired through either a single acquisition straight out, or a series of acquisitions made over a period of three years. Additional acquisitions in the company by a person who already holds a majority interest will also be picked up.
Acquisitions of interest in companies or trusts that are quoted on a recognised financial market, such as the Australian Stock Exchange, will continue to be excluded from land rich stamp duty. Land rich stamp duty will apply to a subsequent acquisition of interest, where the entity is unquoted at the time of acquisition and a majority interest has been acquired or increased as a result of that acquisition. For example, if 80% of a company’s shares are acquired when it was quoted, and the remaining 20% is acquired when the company is unquoted, duty will apply to the 20% acquisition unquoted. The current legislation is unclear as to whether the full 100% is subject to duty or no duty is payable.
There is an exception to all of this, and that is the family farm. The Northern Territory has a family pastoral land exemption for direct transfers of pastoral land between family members. This exemption has a number of conditions to prevent abuse. The no consideration party applies to descendants, not ascendants, and includes siblings, de factos and step relations.
The current land rich provisions have exemptions for all primary property, so the exemption has been aligned such that the direct transfer rules apply to land rich transactions. That is the example I have before me, and it is on the record now for you to go back and study. It is a question of equity. Honestly, we do not see it fair that a major company can walk through the Territory and pick up a huge asset, such as a hotel worth $15m, and pay $480 in stamp duty to the Territory, where Joe Punter, when buying the family home is up for - as I said, depending on the purchase price - anywhere between $4000 and $8000. This is not equitable and we will address it.
Last updated: 09 Aug 2016