Northern Territory Second Reading Speeches

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FIRST HOME OWNER GRANT BILL 2000

(This an uncorrected proof of the daily report. It is made available under the condition that it is recognised as such.)

The purpose of the bills is to put in place a number of national tax reform related measures.

In relation to the first bill, the full agreement, known as the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations as agreed by the Commonwealth and all States and Territories in June 1999, is set out in schedule 1 to the bill,

This agreement forms part of the Commonwealth government’s “A New Tax System”, the centrepiece of which is the introduction of a goods and services tax.

The new tax system also includes the elimination of a number of existing inefficient taxes which are impeding economic activity.

The Commonwealth tax reform package also includes substantial income tax cuts and compensation arrangements, simplification of the tax payment and reporting system and a reduction in fuel costs for business, including the mining, pastoral and fishing industries.

The Intergovernmental Agreement sets out those aspects of the Commonwealth tax reform package which will directly impact on the states and territories.

Under the agreement, States and Territories will receive all the revenue from the GST, commencing 1 July 2000.

The GST will compensate for:

The abolition of Commonwealth financial assistance grants from 1 July 2000;
The abolition of Commonwealth replacement revenues for the previous state and territory franchise fees on tobacco, fuel and alcohol from 1 July 2000;
The abolition of tourism marketing duty from 1 July 2000;
The abolition of financial institutions duty and stamp duty on quoted marketable securities from 1 July 2001; and
The possible abolition of debits tax by 1 July 2005.

The Intergovernmental Agreement provides for future the review of further business stamp duties to be considered for abolition.

The GST will also apply to gambling and reductions in state and territory gambling taxes to take account of the impact of the GST. These measures provide the Territory with revenue from a more robust tax base that can be expected to grow over time.

On the expenditure side the reforms mean that states and territories:

Will no longer need to provide their off-road diesel fuel subsidies as the Commonwealth has implemented a replacement national scheme
The elimination of sales tax currently embedded in the goods they purchase;
Will be required to fund and operate a first home ownership assistance scheme to help offset the effect of the GST on house prices; and
Will pay the Australian Taxation Office for the cost of administering the GST.

The Commonwealth has also guaranteed that state and territory budgets will be no worse off and will provide additional funding to meet that commitment.

Financial Relations Agreement (Consequential Provisions) Bill

I will now address the provisions contained in the first bill in detail.

Part 1 of the bill sets out when the provisions of the bill are to commence and provides for the inclusion of the Intergovernmental Agreement in schedule 1 to the bill.

Part 2 of the bill provides for the cessation of tourism marketing duty from 1 July 2000.

The bill also ensures that an accommodation house will not be required to be registered, or pay tourism marketing duty in respect of a period or part of a period of accommodation after 1 July 2000. However, the bill will require tourism marketing duty to be payable for periods of accommodation let prior to 1 July 2000.
Nothing in these amendments will prevent the manager of an accommodation house from recovering duty from an occupant for a period of accommodation taken prior to 1 July 2000.

Members will recall tourism marketing duty was introduced on 1 August 1987 to fund a national and international promotion to enhance tourism in the Territory. Notwithstanding the cessation of this duty, the Territory government will maintain its commitment to funding of the industry, including regional funding.

Part 3 of the bill seeks to provide for the cessation of the payment of fuel subsidies and fuel supplier licensing arrangements from 1 July 2000. The fuel subsidies act provides for the payment of three fuel subsidies, namely:

An off-road diesel subsidy of 2 cents per litre;
A special fuel subsidy, currently 7.254 cents per litre, payable to McArthur River Mines in respect of diesel used at the mine and to mothership operators in respect of diesel fuel supplied to trawlers at sea; and
A general fuel subsidy of 1.1 cents per litre payable to fuel wholesalers on supplies of fuel into the Territory.

Members will recall this act was part of the temporary safety net arrangements put in place in response to a High Court decision in August 1997 which cast doubt on the constitutionality of the business franchise fees operating at that time.

The Intergovernmental Agreement provides for GST revenues to replace all of the safety net payments from 1 July 2000. The cessation of the fuel subsidy scheme is also supported by the petroleum industry.

The Commonwealth will effectively take over the off-road subsidies by expanding its current industry specific off-road diesel fuel rebate scheme to rail and marine diesel. Under the new arrangements, the mining pastoral and fishing industries will be eligible for a full excise rebate. Accordingly, the Territory's off-road diesel and special fuel subsidies will cease from 1 July 2000.

The cost saving has been taken into account in the Commonwealth-State financial arrangements as agreed under the Intergovernmental Agreement.

The bill also proposes the cessation of the general fuel subsidy of 1.1 cents per litre, reflecting the difference between the previous franchise fee rate and the Commonwealth surcharge that replaced it.

The cessation of this subsidy should save around $6.7 million annually. As stated in my budget speech, this saving to the Territory budget will be used to assist with the funding for a major initiative to expand information technology in Territory schools. For business users, this will be largely offset by the claiming of a GST credit for their fuel usage arising from the reduction in the fuel excise rate to make room for the GST.

In addition, a significant portion of the general subsidy is attributed to the consumption of diesel by transport firms, which will be eligible to receive excise rebates of around 23 cents per litre for diesel used in transport vehicles over 4.5 tonnes and GST input credits. It is expected that these cost reductions should transfer into reduced transport costs for goods transported into the Territory.

While fuel subsidies will cease in respect of fuel supplied from 1 July 2000, the provisions of the fuel subsidies act will continue to operate in respect of fuel supplied before that date.

This will allow claimants to obtain:

The general subsidy in respect of fuel supplied or used prior to 1 July 2000;
The off-road diesel subsidy where diesel is supplied prior to 1 July 2000, but used after that date;
The special subsidy where fuel is supplied to McArthur River Pty Ltd prior to 1 July 2000, but used after that date; and
The special subsidy where fuel is supplied or used by a mothership operator prior to 1 July 2000.

In addition, the licensing of fuel suppliers will no longer be required and existing licensees will be entitled to a pro-rata refund of their licence fee for the period of their licence which is outside the cessation date.

Part 4 of the bill seeks to clarify the interaction of the existing stamp duty bases with the GST. In many instances, stamp duty applies to a value that is inclusive of other indirect taxes and costs like sales tax. For instance, for the purposes of assessing the stamp duty payable on the transfer of a motor vehicle registration, the sales tax inclusive value of the vehicle is used.

As the GST replaces the current wholesale sales tax regime, it is appropriate that stamp duty be based on the GST inclusive price, value or consideration. A similar approach has been taken in the United Kingdom and New Zealand, and by all states and the A.C.T.

Mr Speaker, there is however, one exception, and that is the treatment of stamp duty imposed on hiring arrangements. This particular stamp duty interacts with the GST such that there is a compounding effect whereby stamp duty is imposed on GST and vice versa. To clarify the issue, the bill sets out that stamp duty on hiring arrangements is to be imposed on the GST exclusive price paid under a hiring arrangement.

Part 5 of the bill provides for the cessation of financial institutions duty from 1 July 2001. The revenue forgone by the cessation of financial institutions duty will be replaced by GST revenue. To facilitate the cessation of financial institutions duty, this bill ensures that no liability will arise in respect of a receipt or short term dealing on or after 1 July 2001.

In addition, amendments are proposed to ensure that returns will no longer be required to be lodged in respect of receipts or dealings arising in any month after 1 July 2001. Also, short term dealers will no longer be required to hold a short term dealers certificate after 1 July 2001.

Part 6 of the bill provides for the cessation of stamp duty on the sale and purchase of marketable securities quoted on a recognised stock exchange from 1 July 2001. Stamp duties imposed on shares and other marketable securities which are not quoted on a recognised stock exchange will remain unchanged.

It is proposed that the Taxation (Administration) Regulations will prescribe the recognised stock exchanges which meet a nationally uniform criteria.

The bill also includes savings provisions which ensure investigation powers, record keeping requirements, assessment, objection and appeal provisions and other supporting administrative powers are retained past 1 July 2000 or 1 July 2001 as the case may be.

Part 7 of the bill includes amendments to ensure that territory gambling tax rates are reduced to offset the impact of the GST. However, where the existing Territory tax is less than the GST impact, the Territory tax rates are reduced to zero and no reimbursement is to be made to completely offset the GST. This occurs in limited cases only and has minor consequences for affected operators.

To this end, the bill proposes amendments to the:

Gaming machine regulations to reduce the tax payable on player loss by 9.09% for hotel and club based gaming machines (from 47% to 37.9%);

Racing and Betting Act to:

Reduce the tax payable on turnover by an amount equivalent to 9.09% of player loss or to zero as the case may be for sports bookmakers (from 0.5% to 0%) and on-course bookmakers (from 1.55% to 1.0%); and

Bringing betting turnover tax on New Zealand sourced bets into line with other international (and GST free) based bets (from 0.5% to 0.25%).

Part 8 of the bill seeks to amend the Pay-Roll Tax Act to clarify the pay-roll tax treatment of certain payments defined as, or deemed to be, “wages” for the purposes of that act, which may also be subject to GST.

As a general rule, the activities done as an employee are not taxable supplies and therefore are not subject to GST. However, in some limited cases, payments that are deemed to be ‘wages’ for pay-roll tax are subject to GST. This bill proposes that pay-roll tax is not to be charged on any increase in payments that are defined as, or deemed to be, wages where the increase is directly attributable to the GST.

Part 9 of the bill includes a broad “catch all” amendment which clarifies that the amount of all territory fees and charges as quoted in their respective legislation is not to be taken to include the GST, if applicable.
This means that where specific fees and charges are taxable for GST, the amount quoted in the various legislation does not include GST and the final price is to be taken as the quoted price plus GST.

Part 10 of the bill deals with the interaction of the GST on the Territory’s Mineral and Petroleum Royalty Regime. Under the Territory’s Mineral and Petroleum Royalty legislation, royalty is calculated by applying a rate to the market value for mined product less certain allowable costs. Most of the allowable costs are largely exempt from wholesale sales tax. The replacement of the wholesale sales tax with the GST is likely to result in an increase in the GST inclusive amount of these costs, notwithstanding that the GST paid on these costs is refunded to the mining company as a GST credit. This has the result of inflating GST inclusive costs which in turn would reduce royalty collections. Furthermore, the adoption of a GST inclusive base for royalties would result in higher royalties being imposed on domestic sales compared to export sales.

To counter these concerns, it is proposed to ensure that GST exclusive amounts be used for the purposes of the mineral royalty and petroleum legislation. This approach should insure that royalty collections remain unaffected by the imposition of the GST and maintains equity in royalty impost between domestic and export sales.

As agreed under the Intergovernmental Agreement, the states and territories will administer a scheme to pay a once only maximum grant of $7,000 to eligible first home owners.

The grant is payable to offset the impact of the introduction of the GST on the price of a home for first homebuyers. The grant will only be paid where each applicant and their spouse/s have not previously owned a home. The grant will be available for the purchase of homes and the building of new homes.

In all circumstances, the grant will be in addition to existing first home buyer grants and concessions provided by the NT government. In particular, the first home buyer stamp duty concession of up to $2,096 will be available in addition to the $7,000 first home owner grant. This will allow total assistance to eligible first home owners of up to $9,096.

It is estimated that approximately 1,100 applications will be approved annually in the territory at a cost of $7.7m per annum. The Intergovernmental funding arrangements take account of the cost of this scheme.

The payment of the grant can only be made where:

The application is made by a natural person/s within a designated time period and all purchasers are a party to the application;

The applicant or the applicant’s spouse has not previously owned a residential property prior to 1 July 2000, or the applicant or the applicant’s spouse has not owned and resided in a residential property after 30 June 2000;

The applicant or one of the applicants is an Australian citizen or a permanent resident;

The applicant or applicant’s spouse (whether legally married or a de facto partner) was not party to an earlier application upon which a grant was paid under the scheme of any Australian jurisdiction; and

The applicant occupies the home to which the application relates within 12 months after the completion of the purchase transaction or a longer period specified by the commissioner.

The grant will not be available to family trusts and companies; although, the grant will be able to be claimed on behalf of a person under a legal disability by a guardian who holds the beneficial interest in trust.

The grant will also be available to applicants who have entered into a financing mechanism which involves a shared equity arrangement with Territory Housing.

The grant will only be available for a transaction relating to the purchase or building of a home in the Territory which is made or commenced on or after 1 July 2000.

Specific provisions have been included which are aimed at excluding a person from the grant where they have entered into an arrangement to qualify for the grant in respect of the purchase of a home that was substantially built prior to the commencement of the legislation. These provisions will effectively exclude a person qualifying for the grant where they have purchased a home GST free.

The eligibility criteria for the grant was established in the Intergovernmental Agreement and drafted into the bill in conjunction with all other states and the A.C.T. this approach ensures a consistent eligibility criteria is enacted throughout Australia.

IMr Speaker, I commend the bills to honourable members.

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