South Australia - the best place to do business. Government response to the State Tax Review

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1 STATE BUDGET South Australia - the best place to do business Government response to the State Tax Review

2 PREMIER S STATEMENT SOUTH AUSTRALIA IS THE PLACE WHERE PEOPLE AND BUSINESS THRIVE That is my vision for this great State. South Australia is already a great place to live and we are proud of that as a community. This vision is about protecting the way of life that we value but opening the door to new ideas, new opportunities, new people and new businesses. It is about finally shaking off the perception that Adelaide is boring, conservative or staid. It is about all of us taking bold action and seizing opportunities. It s acknowledging that we must try new things, even though some of them might not go to plan. This vision is at the heart of our economic development strategy. It emerged from our approach to Government where there is a partnership between strong business, strong Government and strong community. That vision is for thriving businesses to employ thousands of extra South Australians in good, well paid, secure jobs. Jay Weatherill Premier of South Australia 2 GOVERNMENT RESPONSE TO THE STATE TAX REVIEW

3 TREASURER S STATEMENT One of the Government s key economic priorities is to make South Australia the best place to do business. To help deliver on this priority, the Government believes that our State tax system needs to reward effort and not stand in the way of those wanting to invest, grow and create jobs. We also need to reduce the cost of doing business in South Australia to help them create jobs. We need investment in new industries and businesses to create jobs for our young people entering the labour market for the first time, and for existing workers in search of a new career. This is particularly crucial as we approach the closure of our automotive manufacturing sector in We cannot rely on others we have to create a truly international economy that engages with the rest of the world. We have to support the emergence of new industries. The tax reforms the Government is making following the State Tax Review will provide significant assistance to South Australian businesses. The package of reforms represents the most comprehensive tax reform in our State s history. In total, almost $670 million in tax reductions will be provided over the next four years as part of this tax reform package, including ongoing reductions of more than $268 million per annum from Over the next decade these tax changes will return almost $2.5 billion to businesses and the community. Businesses in South Australia already enjoy the most competitive payroll tax regime in the nation and the Government s recent changes to WorkCover will deliver a reduction in business costs in South Australia of about $180 million per annum. But transactional taxes present extra costs for those seeking to create new businesses or expand existing ones. By abolishing business stamp duties, the Government is removing a significant cost barrier to business investment and expansion. This will provide a lasting improvement to the South Australian economy and will encourage the creation of new businesses and more jobs for South Australians. Small business is the engine room of our economy with more than 95 per cent of businesses in our State employing less than 20 people. The Government is determined to encourage and foster growth and innovation in this important sector. We believe the reforms will assist small and medium enterprises to expand and diversify, ensuring our small business success rate remains the highest in mainland Australia. The Government will also abolish the Save the River Murray Levy from 1 July 2015 in recognition that the original purpose of the levy has been achieved. Specifically to allow South Australians to lead a Save the River Murray campaign to put the future of the Murray on the national agenda. This will provide savings to most households and businesses of more than $40 and $182 per year respectively. The Government s tax changes reduce the harmful impact inefficient taxes have on the economy, and are consistent with the views expressed by South Australians during the State Tax Review. I would like to thank the South Australian community for contributing to the State Tax Review process. Tom Koutsantonis Treasurer 18 June 2015 GOVERNMENT RESPONSE TO THE STATE TAX REVIEW 3

4 CONTENTS The State Tax Review Process 5 Outcome of the State Tax Review 6 Timing of the tax changes 7 What the tax changes mean for the economy 8 What the tax changes mean for businesses in South Australia 9 Tax comparisons Commonwealth Grants Commission total tax effort 10 Tax paid per person in South Australia 10 Tax comparisons for hypothetical businesses 11 Interstate comparisons 12 Savings to business Savings from the Government s changes to stamp duty 14 Savings from extending the small business payroll tax rebate 15 What the tax changes mean for South Australian households 16 Rural and regional South Australia 17 Other tax and related relief the Government has provided since coming to Office 18 National review: White Paper on the Reform of Australia s Tax System 19 Impact of the Government s tax changes on the State Budget 19 The Government s tax changes in detail 20 4 GOVERNMENT RESPONSE TO THE STATE TAX REVIEW

5 THE STATE TAX REVIEW PROCESS In February 2015 the Government announced that it would undertake a State Tax Review and subsequently released a Discussion Paper to facilitate consultation with the South Australian community. As part of the review process the Government held a number of forums in Adelaide and regional South Australia and met with dozens of representatives from industry, peak groups and business. More than 80 formal submissions were also received in response to the Discussion Paper. The feedback the Government received over the course of the review process overwhelmingly supported reducing the negative impact inefficient taxes have on the economy. Submissions to the State Tax Review can be found at The State Tax Review has now been completed and the Budget implements the outcomes of the review. GOVERNMENT RESPONSE TO THE STATE TAX REVIEW 5

6 OUTCOME OF THE STATE TAX REVIEW Taxes to be ABOLISHED Tax RELIEF Taxes to be considered as part of the NATIONAL TAX REFORM process Share duty Stamp duty on: - non-real property transfers (eg. non-fixed plant and equipment) - non-residential real property transfers (complete abolition 1 July 2018) - genuine corporate reconstructions Save the River Murray Levy Conveyance duty and land tax on principal place of residence properties transferred into Special Disability Trusts Hindmarsh Island Bridge Levy Payroll tax on small business the small business rebate will be extended to Lower stamp duty on mining tenements before being abolished in 2018 Land tax index thresholds (incl. increase the tax-free threshold from $ to $ ) Payroll tax Online gambling taxation -$3.0 million -$36.4 million -$199.5 million -$3.0 million -$28.8 million -$2.3 million -$ $11.3 million -$0.5 million -$12.0 million TAX SIMPLIFICATION measures Replace existing ex-gratia relief with legislative exemptions for: - Farm transfers between family members - Property donations to charities - Disability service providers and incapacitated persons in relation to motor vehicle taxes Other changes to tax legislation -$0.1 million The Government s tax changes in detail section of this document provides additional information on the Government s proposed tax changes. THE GOVERNMENT WILL NOT INTRODUCE AN ANNUAL LAND TAX ON THE FAMILY HOME THE GOVERNMENT WILL NOT INTRODUCE A CONVEYANCE DUTY OR LAND TAX SURCHARGE ON FOREIGN BUYERS 6 GOVERNMENT RESPONSE TO THE STATE TAX REVIEW

7 TIMING OF THE TAX CHANGES 18 June 2015 Abolish share duty Abolish stamp duty on non-real property transfers Expand the stamp duty concession for exploration tenements to include retention tenements Expand the eligibility criteria for corporate reconstruction relief Introduce a conveyance duty exemption for principal residential properties transferred into Special Disability Trusts for no consideration 1 July 2015 Abolish the Save the River Murray Levy Introduce the cost of living concession for pensioners and low-income earners Extend the small business payroll tax rebate to Increase land tax thresholds by around 2.5 per cent (the tax-free threshold will increase from $ to $ ) and other minor amendments to the Land Tax Act 1936 Introduce a land tax exemption for principal residential properties held in Special Disability Trusts Abolish the Hindmarsh Island Bridge Levy Date of assent of amended legislation Amend the Stamp Duties Act 1923 to: - expand the stamp duty exemption for farms transferred between family members to cover transfers that involve the use of certain types of trusts - extend the definition of family groups in the Stamp Duties Act 1923 to include de facto couples - replace the stamp duty ex-gratia relief administrative schemes for disability service providers, incapacitated persons and property donations to charities, with legislative exemptions Amend the Motor Vehicles Act 1959 to replace a registration fee ex-gratia relief administrative scheme for vehicles used to transport incapacitated minors, with a legislative exemption Amend the Taxation Administration Act 1996 to only require 50 per cent of the tax in dispute to be paid before an appeal can be lodged 1 July 2016 One third reduction of stamp duty on non-residential real property transfers 1 July 2017 Further third reduction of stamp duty on non-residential real property transfers 1 July 2018 Abolish stamp duty on non-residential real property transfers Abolish stamp duty on transfers of units in unit trusts Abolish stamp duty on mining tenement transfers Remove the $1 million stamp duty landholder model threshold GOVERNMENT RESPONSE TO THE STATE TAX REVIEW 7

8 WHAT THE TAX CHANGES MEAN FOR THE ECONOMY " We need to reduce the cost of business in South Australia to help them create jobs. The Government s changes to state taxes will have a lasting impact on the economy. The tax changes will deliver almost $670 million in tax reductions over the four years to and reductions of more than $268 million each year from Over the next decade, these tax changes will return almost $2.5 billion to businesses and the community. In addition, employers will receive ongoing savings of around $180 million per annum as a result of the Government s changes to WorkCover. Most economists agree that stamp duty on business transfers is a disincentive to business investment. This is because stamp duty on business transfers imposes extra costs on those that want to create new businesses or expand existing ones and often stops these investments from occurring. As the chart below shows, stamp duty on property transfers has a larger impact on investment decisions than other taxes. Abolishing stamp duty on non-residential property transfers will remove a large barrier to business investment and expansion, encouraging economic growth and job creation. The Government considers it appropriate that it directs its efforts to reducing the harmful impact this tax has on the economy. Efficiency of State taxes economic loss (cents lost per dollar of tax raised) Land Tax (non-residential) Land Tax (residential) Gambling Tax Stamp duty (residential) Payroll Tax Insurance Tax (total) Motor Vehicle - Rego (private) Motor Vehicle - Stamp duty (private) Motor Vehicle - Rego (business) Motor Vehicle - Stamp duty (business) Stamp duty (non-residential) Stamp duty (all property) - KPMG 2010 Stamp duty (non-residential) - KPMG 2011 Stamp duty (all property) - Treasury 2015 Stamp duty (non-residential) - Independent Economics MORE EFFICIENT / LESS EFFICIENT Source: Deloitte Access Economics 2015, KMPG 2010 and 2011, Commonwealth Treasury GOVERNMENT RESPONSE TO THE STATE TAX REVIEW

9 WHAT THE TAX CHANGES MEAN FOR BUSINESSES IN SOUTH AUSTRALIA The cost of doing business in South Australia will fall substantially as a result of the Government s tax changes. The reforms will make South Australia a very attractive place to set up business and will assist companies to consolidate and grow. Importantly, the changes will also ensure that South Australian firms are better placed to respond and act on the challenges and opportunities that exist in the economy. To attract new investment and create jobs we need a tax system that supports those who are trying to create new opportunities that will provide jobs for South Australians. Once stamp duty on non-residential real property transfers is phased out, South Australia will be the only Australian state to not levy this duty. The tax changes being made as part of this tax reform package are not the only measures the Government has implemented to make South Australia the best place to do business. South Australian businesses enjoy the most competitive payroll tax regime in the nation and, from 1 July 2015, employers will also save close to $180 million per annum from the Government s changes to the WorkCover scheme. More than 6800 transfers of non-residential property will benefit each year from the Government s changes to stamp duty on non-residential property transfers and about 2200 employers are expected to benefit from extending the small business payroll tax rebate to Most businesses will also save more than $182 per annum from the abolition of the Save the River Murray Levy. GOVERNMENT RESPONSE TO THE STATE TAX REVIEW 9

10 TAX COMPARISONS Commonwealth Grants Commission total tax effort South Australia s tax effort is expected to decline significantly as a result of the tax changes the Government is making with South Australia's adjusted total tax effort expected to move further below the national average. South Australia s total tax effort (%) NATIONAL AVERAGE -2.8 CGC ( ) 1 After tax changes 2 1 Adjusted to remove land tax paid by the South Australian Housing Trust. 2 Adjusted to include the Government s tax changes and recent changes to emergency services levy remissions and to remove land tax paid by the South Australian Housing Trust. Tax paid per person in South Australia South Australia s tax per capita will decline significantly as a result of the Government s tax changes. Decline in tax per person in South Australia ($) GOVERNMENT RESPONSE TO THE STATE TAX REVIEW

11 Tax comparison for hypothetical businesses Institute of Public Affairs, Business Bearing the Burden tax comparison Based on the reference business and tax settings used by the Institute of Public Affairs in its Business Bearing the Burden 2012 publication, South Australia would move from being the highest taxing state to the lowest taxing state once the Government s tax changes have been fully implemented. RANK BEFORE CHANGES AFTER CHANGES Lowest taxes 1 2 NT VIC NT South Australia 3 WA VIC 4 QLD WA 5 NSW QLD Highest taxes TAS South Australia ACT NSW TAS ACT * Department of Treasury and Finance calculations based on information in the Institute of Public Affairs publication. Pitcher Partners State Tax Review comparisons The table below demonstrates the tax savings South Australian business will experience once the Government s changes to state taxes and WorkCover are fully implemented. These comparisons, which are based on the hypothetical businesses used by Pitcher Partners in its State Tax Review publication, suggest that a smaller business could experience tax savings of $ in its first year of operation and a large business could experience savings of almost $ State taxes before changes State taxes after changes CHANGE $ $ $ Larger Business Purchase of property Renting Smaller Business Purchase of property Renting * Department of Treasury and Finance calculations based on information in The Pitcher Partners publication. GOVERNMENT RESPONSE TO THE STATE TAX REVIEW 11

12 INTERSTATE COMPARISONS Stamp duty on non-residential real property transfers South Australia will be the only Australian state to not levy stamp duty on non-residential real property transfers from 1 July In the meantime, the stamp duty costs associated with purchasing non-residential property in South Australia will reduce significantly, making South Australia a very attractive place to invest. The chart below summarises the stamp duty costs involved in buying a $10 million non-residential property in South Australia now and into the future, compared to the stamp duty costs in other Australian states. Stamp duty payable on non-residential real property transfer of $10 million $ $ $ $ $ NSW VIC QLD WA SA TAS $ SA from 1 July 2016 $ SA from 1 July 2017 $0 SA from 1 July 2018 $ GOVERNMENT RESPONSE TO THE STATE TAX REVIEW

13 Stamp duty on non-real property transfers Abolishing stamp duty on non-real property transfers from 18 June 2015 will improve South Australia s competitiveness relative to many of the larger Australian states who levy this duty. Abolishing stamp duty on these transfers will reduce complexity for businesses and encourage investment and growth. Stamp duty payable on non-real property transfer of $ $ $ $ $ NSW $0 QLD WA SA VIC TAS SA effective immediately $0 $0 Stamp duty on share transfers Share duty is being abolished from 18 June This will remove the incentive for businesses to incorporate in other Australian states that do not levy this duty. Share duty on transfer of $1 million $6 000 $ $0 $0 $0 $0 $0 NSW SA SA effective immediately VIC QLD WA TAS GOVERNMENT RESPONSE TO THE STATE TAX REVIEW 13

14 SAVINGS TO BUSINESS Savings from the Government s changes to stamp duty There will be significant savings for anyone that wants to expand or invest in South Australia. Some examples are outlined below. Company A and Company B both operate in the automotive supply chain. Company A decides to buy Company B to consolidate its position in the market and to achieve additional economies of scale so that it can remain competitive. The purchase of Company B involves non-residential property assets of around $1.7 million. Company A will save up to $ in stamp duty as a result of the Government's tax reform. A B A business owner wants to consolidate a business that she purchased a year ago with an existing business. The business being consolidated has non-residential property assets of around $3 million. The Government s changes to stamp duty relief for corporate reconstructions will mean that the owner will save $ in stamp duty. An individual purchases a shop on Jetty Road, Glenelg, to set up a continental deli. The shop has a capital value of about $1.3 million. The individual will save up to $ in stamp duty as a result of the Government's changes. An industry super fund purchases a commercial building in the Adelaide CBD that has a capital value of $85 million. The super fund will save up to $4.7 million in stamp duty depending on when the property is purchased. An employer has a taxable payroll of $1 million in The Government s extension of the small business payroll tax rebate and the changes that have been made to the WorkCover scheme will save the employer $ in A food manufacturing company is looking to expand and purchases land for a new factory. The land is valued at $3.5 million. The company will save up to $ in stamp duty which can be used for the purchase of plant and equipment. 14 GOVERNMENT RESPONSE TO THE STATE TAX REVIEW

15 The stamp duty savings for selected non-residential real property values are provided in the table below. Capital value ($) Current duty ($) 1 July 2016 ($) 1 July 2017 ($) 1 July 2018 ($) NO TAX NO TAX NO TAX NO TAX NO TAX Savings from extending the small business payroll tax rebate South Australia has the most competitive payroll tax regime in the nation according to the Commonwealth Grants Commission. Extending the small business payroll tax rebate to will mean that about 2200 employers will receive payroll tax relief of up to $9 800 in The table below summarises the rebate amounts that will be available in Annual payroll ($) Payroll tax without rebate ($) Payroll tax with rebate ($) Rebate amount ($) GOVERNMENT RESPONSE TO THE STATE TAX REVIEW 15

16 WHAT THE TAX CHANGES MEAN FOR SOUTH AUSTRALIAN HOUSEHOLDS The Government has ruled out replacing residential conveyance duty with a broad-based property tax. While the Government did include the option of replacing conveyance duty with a broad based property tax in the State Tax Review Discussion Paper, the Government believes that this change could only occur with broader consultation and community acceptance. The Government s tax changes will assist the most vulnerable in our community. The Government will protect pensioners and low-income earners from cuts to concessions by providing a new cost of living concession to help with everyday expenses. The concession, of up to $200, comes into effect from 1 July 2015 and will be paid directly to households. The cost of living concession replaces the council rate concession and will benefit more than households across South Australia. Importantly, the eligibility for the new concession has been expanded to include pensioners and low-income earners who are tenants. Transfers of a beneficiary s principal place of residence into their Special Disability Trust will be exempt from stamp duty where the property is transferred into the Special Disability Trust for no consideration. All such properties will also be exempt from land tax. In addition, relief that is currently provided under a number of ex-gratia administrative schemes to assist families, children and other people with disabilities will be replaced with legislative exemptions. The changes will make it easier for these groups to continue to receive the assistance they require. The abolition of the Save the River Murray Levy will save most households more than $40 each year. 16 GOVERNMENT RESPONSE TO THE STATE TAX REVIEW

17 RURAL AND REGIONAL SOUTH AUSTRALIA A number of the tax changes the Government is making as part of its response to the State Tax Review will provide direct assistance to rural and regional South Australia. These include: Expanding the stamp duty exemption for farms transferred between family members to include transfers that involve the use of certain types of trusts. Abolishing stamp duty on the transfer of aquaculture leases and fishing licences. Expanding the stamp duty concession for exploration tenements to include retention tenements. Abolishing the Hindmarsh Island Bridge Levy. Rural and regional South Australia will also benefit from the full package of tax reforms the Government has announced in response to the State Tax Review. GOVERNMENT RESPONSE TO THE STATE TAX REVIEW 17

18 OTHER TAX AND RELATED RELIEF THE GOVERNMENT HAS PROVIDED SINCE COMING TO OFFICE The tax reductions the Government is making in response to the State Tax Review build on the considerable tax and related relief the Government has provided since coming to Office. Other relief the Government has provided since coming to Office includes: Payroll Tax Cutting the payroll tax rate from 5.67 per cent to 4.95 per cent and increasing the tax-free threshold from $ to $ Land Tax Increasing the tax-free threshold for land tax from $ to Cutting the payroll tax rate from 5.67 per cent to 4.95 per cent $ along with changes to other land tax brackets and rates. and increased the tax free threshold from $ to $ The Government has also introduced annual indexation of land tax thresholds which provides ongoing relief to land owners. Abolished Taxes Abolishing mortgage duty, debits tax, cheque duty and lease duty. Stamp Duty Introducing a stamp duty concession of up to $ for eligible purchases of off-the-plan apartments. Housing Grants Providing a $ First Home Owners Grant to eligible first home buyers who purchase a new home. Introducing a Seniors Housing Grant of up to $8 500 for people over 60 years of age who want to right-size their principal place of residence and purchase a new home to live in. Household Concessions The Government is spending around $275 million in total on concessions each year, significantly increasing the amount of household concessions available to eligible South Australians. Some Government concessions include: Energy Energy Up to $215 Water and sewerage Min Max Water (for home owner-occupier) $185 $295 Water (for tenants) $120 $230 Sewerage (for home owner-occupier) $110 Cost of living Home owner-occupier $200 Tenants $100 Self-funded retiree $100 (Home owner-occupier or tenant on Commonwealth Seniors Health Card) Emergency services levy (ESL) ESL fixed property (in addition to general remissions) $46 18 GOVERNMENT RESPONSE TO THE STATE TAX REVIEW

19 NATIONAL REVIEW: WHITE PAPER ON THE REFORM OF AUSTRALIA S TAX SYSTEM In undertaking the State Tax Review process it has become clear that it will only be possible to reform certain state taxes if they form part of national tax reform. Payroll tax The Government considers that there is scope for all Australian jurisdictions to fully harmonise payroll tax. This could mean that a uniform rate and tax-free threshold would apply across the nation. Harmonising payroll tax across the nation could also enable employers that employ in more than one jurisdiction to deal with a single collection agency when preparing and submitting their payroll tax returns, making it easier for these employers. Taxation of online gambling The South Australian Government has announced that it will lead a national conversation about how we change the gambling tax regime to reflect the modern day betting world. It is expected that any taxation changes made as part of this reform will even the playing field and increase tax neutrality between online and traditional operators. IMPACT OF THE GOVERNMENT S TAX CHANGES ON THE STATE BUDGET The cost of the Government s proposed changes to state taxes are summarised in the following table ($m) ($m) ($m) ($m) ABOLISH DUTY ON NON-QUOTED MARKETABLE SECURITIES (SHARE DUTY) ABOLISH THE SAVE THE RIVER MURRAY LEVY ABOLISH DUTY ON NON-REAL PROPERTY TRANSFERS ABOLISH DUTY ON NON-RESIDENTIAL REAL PROPERTY TRANSFERS EXPAND THE ELIGIBILITY CRITERIA FOR CORPORATE RECONSTRUCTION RELIEF ABOLISH DUTY ON TRANSFERS OF UNITS IN UNIT TRUSTS -1.0 REMOVE THE LANDHOLDER MODEL THRESHOLD 1.0 EXPAND THE STAMP DUTY CONCESSION FOR MINING EXPLORATION TENEMENTS TO INCLUDE RETENTION TENEMENTS EXTEND THE SMALL BUSINESS PAYROLL TAX REBATE TO EXEMPT PRINCIPAL PLACE OF RESIDENCE PROPERTY TRANSFERRED TO SPECIAL DISABILITY TRUSTS FROM CONVEYANCE DUTY AND LAND TAX CONVEYANCE DUTY EXEMPTION PRINCIPAL PLACE OF RESIDENCE LAND TAX EXEMPTION OTHER CHANGES TO TAX LEGISLATION TOTAL IMPACT ON THE STATE BUDGET GOVERNMENT RESPONSE TO THE STATE TAX REVIEW 19

20 THE GOVERNMENT S TAX CHANGES IN DETAIL Abolish stamp duty on non-quoted marketable securities Stamp duty on non-quoted marketable securities (also known as share duty) will be abolished from 18 June The duty applied to the purchase or gift of shares not listed on a recognised stock exchange. Abolish the Save the River Murray Levy The Save the River Murray Levy will be abolished from 1 July 2015, providing savings of more than $40 per annum (indexed) to almost households and $182 per annum (indexed) to about non-residential properties. The Save the River Murray Levy is currently paid by all SA Water customers that are able to be supplied with River Murray water. Because the Levy is a flat dollar amount it is regressive. The specific measures funded by the Save the River Murray Levy will continue to be delivered. Abolish stamp duty on non-real property transfers Stamp duty on non-real property transfers will be abolished from 18 June 2015 and is expected to provide relief to about 1300 non-real property transfers each year. Non-real property comprises property that is not land and buildings. Examples include non-fixed plant and equipment, receivables, goodwill, business assets, statutory licences, intellectual property and aquaculture leases. Abolish stamp duty on non-residential real property transfers Stamp duty on non-residential real property transfers (also known as non-residential conveyance duty) will be phased out starting from 1 July Duty rates will be reduced by a third from 1 July 2016, a further one third from 1 July 2017, before the duty is abolished from 1 July It is estimated that there will be up to 6000 non-residential real property transfers each year that will benefit from the phased abolition of this duty. As primary production land is generally exempt from land tax, stamp duty will continue to apply to non-exempt transfers of primary production land. Expand the eligibility criteria for corporate reconstruction relief The Government will provide a stamp duty exemption and expand the existing eligibility criteria for corporate reconstructions from 18 June This will make it easier for businesses to restructure their operations to remain agile and competitive. 20 GOVERNMENT RESPONSE TO THE STATE TAX REVIEW

21 The eligibility criteria will be expanded to: Remove the requirement that substantially all the assets of a corporate group must transfer as part of the reconstruction. Adopt a corporate group definition that is more consistent with that used by other jurisdictions. Remove the three year pre and post association tests. Abolish stamp duty on the transfer of units in a unit trust From 1 July 2018, stamp duty will be abolished on the issue, redemption and transfer of units in a unit trust. Remove the landholder model threshold The Government will remove the $1 million landholder threshold from 1 July The landholder model ensures that if control of an entity changes and that entity holds South Australian land assets above the threshold, conveyance rates of duty apply to the South Australian land assets being transferred. This change coincides with the abolition of stamp duty on non-residential real property transfers and stamp duty will therefore only apply where control of an entity holding South Australian residential or primary production land assets changes. Expand the stamp duty concession for mining exploration tenements to include retention tenements From 18 June 2015, transfers of retention tenements will receive the same concessional stamp duty arrangements that apply to transfers of exploration tenements. The concessional stamp duty arrangements mean that eligible transfers are only required to pay stamp duty of up to $1000 rather than the duty rates that would normally apply. No stamp duty will be payable on transfers of mining licenses and tenements from 1 July 2018, consistent with the phased abolition of stamp duty on non-residential real property transfers. Extend the small business payroll tax rebate to The small business payroll tax rebate introduced in the State Budget will be extended for an additional year to The rebate provides payroll tax savings for employers with taxable payrolls less than or equal to $1.2 million. Eligibility criteria for the rebate will be unchanged from the rebate that applied in and Eligible employers will receive the rebate following finalisation of the payroll tax reconciliation process. It is estimated that about 2200 employers will benefit from this initiative with a maximum rebate of $9800 available. Exempt principal place of residence property transferred to Special Disability Trusts from conveyance duty and land tax Under current arrangements, conveyance duty is payable when a principal place of residence is transferred into a Special Disability GOVERNMENT RESPONSE TO THE STATE TAX REVIEW 21

22 THE GOVERNMENT S TAX CHANGES IN DETAIL (CONT.) Trust. The property is also liable for land tax if its site value is more than the tax-free threshold. From 18 June 2015, properties transferred into Special Disability Trusts for no consideration and used as the principal place of residence for the beneficiary will be exempt from conveyance duty. All such properties will also be exempt from land tax from 1 July Abolish the Hindmarsh Island Bridge Levy The Hindmarsh Island Bridge Levy will be abolished from 1 July The levy is currently paid by property owners when new allotments are created on Hindmarsh Island. The levy represents the property owner s contribution to the construction cost of the Hindmarsh Island Bridge. Other changes to tax legislation The Government will make a number of other changes to the Stamp Duties Act 1923, the Land Tax Act 1936, the Motor Vehicles Act 1959 and the Taxation Administration Act The Stamp Duties Act 1923 will be amended to: Expand the stamp duty exemption for interfamilial farm transfers, in particular in relation to transfers involving the use of certain types of trusts, consistent with RevenueSA s long standing assessing practice. This change will take effect from the date of assent of amended legislation. Provide an exemption from stamp duty on motor vehicle transfers where the parent or legal guardian of an incapacitated person who is a minor purchases a vehicle to transport the minor. This exemption will replace the current ex-gratia relief scheme. This change will take effect from the date of assent of amended legislation. Provide an exemption from stamp duty on motor vehicle transfers where disability service providers purchase vehicles to transport persons with disabilities. This exemption will replace the current ex-gratia relief scheme. This change will take effect from the date of assent of amended legislation. Provide a stamp duty exemption to charitable and religious bodies that purchase property that is to be used wholly or mainly for the organisation s charitable or religious purposes. This exemption will replace the current ex-gratia relief scheme. This change will take effect from the date of assent of amended legislation. Remove the exemption available in relation to the partition of property between members of a family group to prevent the avoidance of stamp duty in these instances. This change will take effect from 18 June GOVERNMENT RESPONSE TO THE STATE TAX REVIEW

23 Extend the definition of family group in the Stamp Duties Act 1923 to include de facto couples and domestic partners. The current definition does not include de facto couples or domestic partners, restricting access to certain exemptions contained in the Act. This change will take effect from the date of assent of amended legislation. Clarify that the relevant date for determining the value of a property being transferred for stamp duty purposes is the date of transfer and not the date of contract. This change will take effect from the date of assent of amended legislation. The Land Tax Act 1936 will be amended to: Extend the exemption / waiver from land tax where a person owns more than one principal place of residence on 30 June and to remove the requirement that applications for a refund be lodged before 30 September. This will ensure that more taxpayers are able to access this exemption / waiver. This change will take effect from midnight 30 June Tighten the minor interest provisions in relation to how they apply to trusts to prevent land tax avoidance and ensure the aggregation principle applies more equitably. This change will take effect from midnight 30 June Allow penalty tax on assessments of land tax where a taxpayer had been receiving an exemption due to providing RevenueSA with false or misleading information. This change will take effect from midnight 30 June The Motor Vehicles Act 1959 will be amended to: Provide a 50 per cent concession to the registration fee component of one motor vehicle where the vehicle is used mainly for transporting an incapacitated minor, subject to certain conditions. This concession will replace the current ex-gratia relief scheme. This change will take effect from the date of assent of amended legislation. The Taxation Administration Act 1996 will be amended to: Only require 50 per cent of the tax in dispute to be paid before an appeal can be lodged. Currently 100 per cent of the tax in dispute is required to be paid before an appeal can be lodged. This change will take effect from the date of assent of amended legislation. GOVERNMENT RESPONSE TO THE STATE TAX REVIEW 23

24 Department of Treasury and Finance State Administration Centre 200 Victoria Square, Adelaide South Australia, 5000 GPO Box 1045, Adelaide South Australia, 5001 Telephone: +61 (08)

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