Victorian Bills Explanatory Memoranda Victorian Bills Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
Duties and Land Tax Acts (Amendment) Bill
As Sent Print
EXPLANATORY MEMORANDUM
General
The Bill amends the Duties Act 2000 to provide a duty exemption for equity
release programs and to amend the land rich duty provisions and the motor
vehicle duty provisions.
The Bill also amends the Land Tax Act 1958 and the Land Tax Act 2005 to
introduce a new regime for the payment of land tax on land held on trust and
to make minor technical amendments.
Clause Notes
PART 1--PRELIMINARY
Clause 1 outlines the purpose of the Bill.
Clause 2 provides for the commencement of the Bill.
PART 2--DUTIES ACT 2000
Clause 3 Sub-clause (1)(a) inserts a definition of "National Schedule" into
section 3(1) of the Duties Act 2000. "National Schedule" is
defined to mean the Schedule to the Road Transport Charges
(Australian Capital Territory) Act 1993 (Cwlth).
Sub-clause (1)(b) substitutes a new definition of "listed trust" in
section 3(1) of the Duties Act 2000. There is a qualification of
the existing definition so that it does not include a unit trust
scheme quoted on any WFE exchange (other than the ASX) that
is not declared by the Commissioner under section 3(4)(a) to be a
listed trust.
Sub-clause (1)(c) substitutes a new definition of "MRC" in
section 3(1) of the Duties Act 2000, so that the definition adopts
the definition in the VicRoads Regulations where Mass Rating
for Charging is defined as having the same meaning as in the
National Schedule.
1
551367 BILL LA AS SENT 18/11/2005
Sub-clause (1)(d) substitutes a new definition of "private
company" in section 3(1) of the Duties Act 2000, so that the
definition now also includes a corporation declared by the
Commissioner under section 3(4)(b) to be a private company.
Sub-clause (1)(e) amends the definition of "widely held trust" in
section 3(1) of the Duties Act 2000. The amendment replaces
paragraphs (b) and (c) of the definition and inserts a new
paragraph (d).
Sub-clause (2) inserts a new sub-section (4) in section 3 of the
Duties Act 2000. Paragraph (a) requires the Commissioner to
make a declaration in regard to a unit trust list on an exchange
other than the Australian Stock Exchange for it to be considered a
listed trust for the purposes of that Act. Paragraph (b) enables the
Commissioner to declare a listed company to be a private
company if he or she considers the listing had a collateral
purpose of avoiding duty.
Clause 4 inserts a new section 55 into the Duties Act 2000.
Section 55(1) provides that no duty is chargeable in respect of a
transaction taking place on or after 15 June 2005 under an equity
release program that results in a change in beneficial ownership.
Section 55(4) contains the following definitions--
"equity release program" which is defined to mean an
arrangement between a financial institution and a
homeowner under which the parties enter into a contract of
sale of land occupied as the homeowner's principal place of
residence.
The definition also requires that under the sale contract, the
financial institution must purchase a part interest in the land
and pay the homeowner an amount for that interest on the
day that the contract is executed (or within 5 business days
afterwards). The homeowner must retain the legal title to
the whole of the land and the land must not be mortgaged
after the contract has come into existence. The sale
contract can only be terminated in certain specific
circumstances;
"financial institution" which is defined as having the same
meaning as in section 3(1) or a friendly society;
2
"homeowner" which is defined to mean a person of or over
pension age who, immediately before entering into the sale
contract, holds an estate in fee simple in the whole of the
land that is occupied by the person as his or her principal
place of residence and whose estate is not subject to any
mortgage;
"pension age" which is defined as having the same meaning as
in paragraph (b) of the definition of "pension age" in
section 23(1) of the Social Security Act 1991 (Cwlth).
Clause 5 amends the land-rich provisions of the Duties Act 2000 as they
relate to landholders.
Sub-clause (1) amends section 71(3) of the Duties Act 2000--
· paragaraph (a) provides that property consisting of
units, shares or any other interest in a linked entity also
includes any debt payable to the landholder by a linked
entity to the extent of the interest held by the landholder
in the linked entity;
· paragraph (b) amends section 71(3)(i) of the Duties Act
2000 by substituting the term "prescribed property" with
"any property of a kind prescribed the regulations".
Sub-clause (3) inserts section 73(3) into the Duties Act 2000, in
which--
· paragraph (a) provides that a reference in the Part to a
vendor includes a reference to the grantee of a put
option or the grantor of a call option;
· paragraph (b) provides that a reference in the Part to a
purchaser includes a reference to a person who holds
a transfer right within the meaning of Part 4A of
Chapter 2 or the grantor of a put option or the grantee of
a call option;
· paragraph (c) provides that a reference in the Part to an
uncompleted agreement includes a reference to an
arrangement that includes both a put and a call option.
3
Clause 6 amends the land-rich provisions of the Duties Act 2000 as they
relate to the acquisition of interests in landholders.
Sub-clause (1) omits the words "or otherwise" from section 76(1)
of the Duties Act 2000.
Sub-clause (2) makes several changes to the Duties Act 2000--
· inserts a new section 77(2A) so that, in addition to
section 77(1), a person who holds an interest in a land
rich landholder acquires an interest in the landholder if
the capacity in which the person holds the interest
changes;
· inserts a new section 77(2B) which provides that,
without limiting sub-section (2A), a person who has a
beneficial interest in a land rich landholder and who
declares a trust over that interest is taken to have
acquired an interest in the landholder;
· inserts a new section 77(2C) which provides that, for the
purposes of section 79, an acquisition of an interest
referred to in sub-section (2A) or (2B) is to be treated as
a separate acquisition from any existing interests held
by the acquirer or any other acquisition of an interest in
a land rich holder unless those acquisitions are made on
behalf of the same person or associated persons.
Sub-clause (3) amends section 79(1)(a)(iii) of the Duties Act
2000 by inserting the words "as set out in sub-paragraph (ii)" to
the end of the section.
Sub-clause (4) amends section 79 of the Duties Act 2000 by
inserting a new sub-section (3A), which provides that for the
purposes of the Part, persons in their capacity as qualifying
investors of a wholesale unit trust scheme are taken not to be
associated persons of other qualifying investors in relation to the
scheme.
Sub-clause (5) makes a minor amendment to correct a spelling
error in section 79(6) of the Duties Act 2000 by substituting
"outcome or decisions" with "outcome of decisions".
Sub-clause (6) amends section 83(2)(a) of the Duties Act 2000
by inserting the words "and (b)", so that the provision applies to
sections 79(1)(a) and (b).
4
Clause 7 inserts a new section 88(6) in the Duties Act 2000, in which--
· paragraph (a) provides that a reference in the section to
a vendor includes a reference to the grantee of a put
option or the grantor of a call option;
· paragraph (b) provides that a reference in the section to
a purchaser includes a reference to a person who holds
a transfer right within the meaning of Part 4A of
Chapter 2 or the grantor of a put option or the grantee of
a call option;
· paragraph (c) provides that a reference in the section to
an uncompleted agreement includes a reference to an
arrangement that includes both a put and a call option.
Clause 8 substitutes a new definition of "disqualifying circumstance" in
section 89B(1) of the Duties Act 2000. The definition now also
includes the failure by a unit trust scheme that is registered under
Division 7 of Part 2 of Chapter 3 to meet a condition of the
registration or the contravention of a condition of registration by
a unit trust scheme or the trustee of the scheme.
Clause 9 substitutes a new section 89C(1)(b)(i) of the Duties Act 2000, so
that the section applies to any person who holds units in the
private unit trust scheme of at least 20% immediately before the
agreement or arrangement was made.
Clause 10 amends sections 89K, 89N and 89PA of the Duties Act 2000.
Sub-clause (1)(a) amends the definition of "qualified investor" to
also include a person who holds units in the unit trust scheme as
custodian or trustee for an investor directed portfolio service,
within the meaning of the relevant ASIC policy statement, under
certain conditions.
Sub-clause (1)(b) makes a minor change to the punctuation in the
definition of "qualified investor" to accommodate the new
definition being inserted by sub-clause (1)(c).
Sub-clause (1)(c) inserts a definition of "relevant ASIC policy
document" in section 89K(1), which means the policy statement
"PS 148: Investor Directed Portfolio Services" published by the
Australian Securities and Investments Commission or any other
policy statement published by that Commission that the
Commissioner from time to time approves for the purposes of
this Division.
5
Sub-clause (2) substitutes section 89K(3) which provides that the
Commissioner may also approve a capacity for the purposes of
the definition of a "qualified investor" if satisfied that the
capacity is as a wholly owned subsidiary of a person in a capacity
referred to in new section 89K(3)(a).
Sub-clause (3) inserts new sub-section (3) in section 89N, which
provides that in relation to the registration of declared public unit
trust schemes, the Commissioner may impose any conditions he
or she considers appropriate on the registration of a unit trust
scheme as a declared public unit trust scheme.
Sub-clause (4) inserts new sub-section (3) in section 89PA,
which provides that in relation to the registration of declared
wholesale unit trust schemes the Commissioner may impose any
conditions he or she considers appropriate on the registration of a
unit trust scheme as a declared wholesale unit trust scheme.
Clause 11 substitutes new section 217 of the Duties Act 2000 to provide
that motor vehicle duty becomes payable on "lodging" an
application for registration or transfer of registration, rather than
on "making or lodging" an application as in the current provision.
The amendment clarifies that the due date for payment of duty
and the lodgment of the related application for transfer are the
same. The section now also includes a note, which states that
regulations 212 and 230 of the Road Safety (Vehicles)
Regulations 1999 contain the requirements for the lodgment of an
application for registration or transfer of a motor vehicle.
Clause 12 makes two consequential amendments to sections 217A(1), 229
and 232 of the Duties Act 2000 relating to motor vehicle duty.
Clause 13 substitutes a new section 233 of the Duties Act 2000 and inserts
new sections 233A to 233H. The effect of these new sections is
to enact in the Duties Act 2000 exemptions from duty that are
currently contained in the Road Safety (Vehicles) Regulations
1999.
New section 233 provides that no duty is chargeable on an
application for registration or transfer of registration of a heavy
trailer, registered or to be registered in the name of a primary
producer and used or to be used solely in the business of the
registered operator as a primary producer. The section also
exempts other types of vehicles used by primary producers.
Section 233 also contains the following definitions--
"agricultural implement" which is defined to mean a vehicle
without its own motive power, built to perform agricultural
tasks;
6
"load" which is defined to mean, in relation to a vehicle, as
including anything that is normally removed from the
vehicle when not in use;
"primary producer" which is defined to mean a person engaged
solely or substantially in agricultural, horticultural,
viticultural, dairying, pastoral or other like pursuits or a
person who is a commercial fisherman the holder of a
licence to take fish for sale;
"primary producer special vehicle" which is defined to mean a
vehicle that is steered by means of a handle bar, designed
for the carriage of not more than one person, has 3 or
4 wheels, has a width not exceeding 1·15 metres and a tare
mass not exceeding 210 kilograms;
"residential address" which is defined to mean, in relation to a
company or other body corporate, its registered office or
any place recorded in the register as its residential or
business address.
Section 233A provides that no duty is chargeable on an
application for transfer or registration of a motor vehicle that is
used for the transport of the disabled, handicapped or injured.
Section 233B provides that no duty is chargeable on an
application for transfer or registration of an incapacitated person's
vehicle.
Section 233C provides that no duty is chargeable on an
application for transfer or registration of a private vehicle used to
convey incapacitated persons or the parent or guardian of an
incapacitated person who is a minor.
Section 233D provides that no duty is chargeable on an
application for transfer or registration of a government or
charitable vehicle used to convey incapacitated persons.
Section 233E provides that no duty is chargeable on an
application for transfer or registration of an incapacitated war
veteran's vehicle.
Section 233F provides that no duty is chargeable on an
application for transfer of registration of a fire fighting or an
emergency response vehicle, including vehicles owned by a State
Emergency Service volunteer unit, a Country Fire Authority
brigade or a municipal council.
Section 233G provides that no duty is chargeable on an
application for transfer or registration of a consular vehicle.
7
Section 233H provides that no duty is chargeable on an
application for transfer or registration of a vehicle which is the
subject of a repossession or restoration.
Section 233H also defines "security interest" to mean, in relation
to a motor vehicle, an interest in, or a power over, a vehicle that
secures payment of a debt or other pecuniary obligation or the
performance of any other obligation but does not include a
possessory lien or pledge.
Clause 14 makes several further consequential amendments to the Duties
Act 2000 relating to motor vehicle duty, by--
· omitting the word "made" from sections 234A(1), 234B
and 235(1);
· substituting the word "made" for the word "lodged" in
sections 235(2), 236 and 238(1);
· repealing section 239, which is no longer needed
because of new section 217 being substituted by
clause 11.
Clause 15 inserts a new section 273(4) of the Duties Act 2000, to provide
that, if a valuation of property covers more than one parcel of
land, section 273(3) requiring that the payment of the cost of a
valuation in certain circumstances applies. The clause also
inserts a new section 273(5) to provide that new section 273(4)
will not apply in circumstances where the valuation under section
273(2) does not lead to an increase in the tax liability, and gives
an example of the operation of new section 273(4) and (5).
Clause 16 inserts a new clause 22 in Schedule 2 to the Duties Act 2000 to
preserve the status of listed trusts that were listed prior to the
commencement of these provisions.
Clause 17 makes a statute law revision, by repealing section 285 and
Schedule 1 of the Duties Act 2000 which contain spent
consequential amendments.
PART 3--LAND TAX ACT 1958
Parts 3 and 4 of the Bill insert a new model for taxing land held in a trust,
which will apply from 2006 onwards. Part 3 amends the Land Tax Act 1958
and Part 4 inserts corresponding provisions into the proposed Land Tax Act
2005. It is necessary to amend both the Land Tax Act 1958 and the Land
Tax Act 2005, as the Bill for the Land Tax Act 2005 is still before the
Parliament.
8
The key elements of the new land tax trusts model are as follows--
· Repeal of the existing trust provisions, contained in sections 51
and 52 of the Land Tax Act 1958, and sections 18 and 44 of
the proposed Land Tax Act 2005.
· Introduction of a tax surcharge of 0·375% for trusts with
aggregate property holdings above $20 000. The default
position is that trustees will be assessed, at the new surcharge
rates, on the aggregate value of land held in each trust.
· As a transitional measure, trustees of existing discretionary
trusts will have a once-off opportunity to nominate a
beneficiary of the trust. The trustee will then be assessed at
ordinary land tax rates on the trust land. The nominated
beneficiary will also be assessed, at ordinary rates, on the
aggregate value of the trust land and any other land owned by
the beneficiary, subject to a deduction for any tax payable by
the trustee. Land acquired by a discretionary trust after
31 December 2005 will be taxed solely in the hands of the
trustee at the surcharge rate.
· Trustees of fixed trusts will be able to provide the
Commissioner of State Revenue with details of the beneficial
interests in trust land. Equally, trustees of unit trust schemes
will be able to furnish details of unitholdings. Trustees that
take up this option will be assessed on the trust land at ordinary
land tax rates. Beneficiaries and unitholders will also be
assessed, at ordinary rates, on the aggregate value of a
proportion of the trust land (calculated by reference to their
proportionate beneficial interest or unitholding) and any other
land they own. This assessment will be subject to a deduction
for tax payable by the trustee.
· Certain types of trusts will be excluded from the above
arrangements. A trustee of an excluded trust will be assessed
on the land held in the trust at ordinary rates, without the
addition of the surcharge. Excluded trusts include charitable
trusts, certain testamentary trusts, complying superannuation
funds, public unit trust schemes and trusts for disabled persons.
· In most cases, land held in a trust which is used as a principal
place of residence of a beneficiary of the trust, and which is not
otherwise exempt from land tax, will not be subject to the trusts
surcharge.
9
· Current exemptions for land which is held in a trust will not be
affected by the new provisions.
· All trustees holding Victorian land on trust will be required to
submit a one-off return prior to 31 December 2005. There will
also be various ongoing reporting requirements for trustees in
certain circumstances.
Clause 18 Sub-clause (1)(a) inserts the following definitions into
section 3(1) of the Land Tax Act 1958--
"beneficiary" which is defined to mean in relation to a
discretionary trust, a person (or a member of a class of
persons), in whom, by the terms of the trust, the whole or
any part of the trust property may be vested in the event of
the exercise of a power or discretion in favour of the person
or in the event that a discretion conferred under the trust is
not exercised;
"child maintenance land" which is defined to mean land held
on trust that was transferred to the trustee for the benefit of
a beneficiary as the result of a family breakdown under
section 102AGA of the Income Tax Assessment Act 1936
(Cwlth);
"Commonwealth Superannuation Act" which is defined to
mean the Superannuation Industry (Supervision) Act 1993
(Cwlth);
"concessional trust" which is defined to mean a trust of which
each beneficiary is a person in respect of whom a
guardianship or administration order is in force under the
Guardianship and Administration Act 1986 or a person
with a disability within the meaning of the Disability
Services Act 1991 or a trust created under a Supreme
Court order for the benefit of a person under a disability;
"discretionary trust" which is defined to mean a trust under
which the vesting of the whole or part of the trust property
is required to be determined by a person either in respect of
the identity of the beneficiaries or the quantum of the
interest to be taken or both or will occur in the event that a
discretion conferred under the trust is not exercised.
The definition does not include an excluded trust, a fixed
trust or a trust to which a unit trust scheme relates;
10
"excluded trust" which is defined to mean a charitable trust, a
concessional trust, a public unit trust scheme, a wholesale
unit trust scheme, a trust the sole beneficiary or
beneficiaries of which is a club referred to in section 13 or
the members of such a club, a trust established by a will
(but only during the period ending on the later of the
3rd anniversary of the testator's death or a further period
approved by the Commissioner, or the 18th birthday of the
first beneficiary to turn 18 if, at the testator's death, all the
potential beneficiaries are minors) and a trust for any tax
year in relation to which it is a superannuation trust;
"fixed trust" which is defined to mean a trust that is not an
excluded trust, a discretionary trust or a trust to which a
unit trust scheme relates;
"listed trust" which is defined to have the same meaning as in
the Duties Act 2000;
"nominated beneficiary" of a discretionary trust, which is
defined to mean a person nominated under section 52D of
the Act;
"nominated PPR beneficiary" which is defined to mean a
person nominated under section 52F of the Act;
"pre-2006 land" which is defined to mean, in relation to a trust,
land that was subject to that trust at midnight on
31 December 2005;
"post-2006 land" which is defined to mean, in relation to a trust,
land that became subject to that trust on or after 1 January
2006;
"public unit trust scheme" which is defined to mean a listed
trust, a widely held trust or a registered imminent public
unit trust scheme or registered declared public unit trust
scheme (within the meaning of the Duties Act 2000);
"superannuation trust" which is defined to mean in relation to
a tax year--
· for a trust established on or before 30 June in the
year preceding the tax year that, in relation to the
year of income ending in that year, is a
complying superannuation fund, a complying
approved deposit fund or a pooled
superannuation trust within the meaning of the
Commonwealth Superannuation Act;
11
· for a trust established after 30 June in the year
preceding the tax year that, as at midnight on
31 December in that year, is a regulated
superannuation fund (or taken to be a regulated
superannuation fund), an approved deposit fund
or a pooled superannuation trust within the
meaning of the Commonwealth Superannuation
Act;
"trust" which is defined to not include an implied or a
constructive trust;
"unit" which is defined to mean, in a unit trust scheme, a right or
interest (whether described as a unit or a sub-unit or
otherwise) of a beneficiary under the scheme, or a right to
any such right or interest, that entitles the beneficiary to
participate proportionately with other unitholders in a
distribution of the property of the trust on its vesting;
"unit trust scheme" which is defined to mean an arrangement
made for the purpose or having the effect of providing
facilities for participation by a person, as a beneficiary
under a trust, in any profit or income arising from the
acquisition, holding, management or disposal of property
under the trust, but does not include an excluded trust;
"wholesale unit trust scheme" which is defined to mean a unit
trust scheme that is registered under Division 7 of Part 2 of
Chapter 3 of the Duties Act 2000 as a wholesale unit trust
scheme, an imminent wholesale unit trust scheme or a
declared wholesale unit trust scheme;
"widely held trust" which is defined to have the same meaning
as that term would have in the Duties Act 2000 if a
reference in paragraph (b) of the definition of "widely held
trust" in section 3(1) of that Act to "300 registered
unitholders" were a reference to "50 registered
unitholders".
Sub-clause (1)(b) repeals the definition of "special trust" in
section 3(1) of the Land Tax Act 1958 as the definition is no
longer used in that Act.
Sub-clause (1)(c) omits the phrase "express or implied" from the
definition of "trustee" in section 3(1) of the Land Tax Act 1958.
Sub-clause (2) inserts a new section 3(6) into the Land Tax Act
1958, stating that for the purposes of paragraph (f)(i) of the
definition of "excluded trust" in section 3(1), the Commissioner
may approve a further period in any particular case.
12
Sub-clause (3) repeals the definitions of "discretionary trust" and
"unit trust scheme" in section 13AA(1) of the Land Tax Act
1958 as well as section 13(2) of the Act, as these are now
covered in section 3(1) of the Act.
Sub-clause (4) inserts a new section 9(1CA) into the Land Tax
Act 1958 to provide that a reference to an owner of land in
section 9(1)(ha) of the Act does not include a reference to a
beneficiary of a trust or a unitholder in a unit trust scheme to
which the land is subject.
Clause 19 inserts section 45(5A) in the Land Tax Act 1958 to provide that
if a joint owner of land is a trustee of a trust to which the land is
subject, no regard is to be had to the existence of the trust in
relation to the joint assessment and liability of the joint owners of
the land as referred to in section 45(2). However, regard is to be
had to the existence of the trust in relation to the separate
assessment and liability of the joint owners as referred to in
section 45(3).
Clause 20 substitutes new sections 51 and 52 in the Land Tax Act 1958
and inserts new sections 52A to 52J.
Section 51 provides a land tax surcharge for trusts.
Section 51(1) provides that the rate of land tax which applies for
trustees in 2006, 2007 and 2008 is contained in clauses 10, 11
and 12 of the Second Schedule to the Act.
Section 51(2) provides that the trustee who is assessed for land
tax under section 51(1) is to be assessed on the whole of the land
subject to the trust as if the land were the only land owned by the
trustee.
Section 51(3) provides that section 51 does not apply to certain
types of land held in trust, that is--
· land subject to a unit trust scheme if an appointment of
a nominated PPR beneficiary for the scheme is in force
and the land is used and occupied as the principal place
of residence of the nominated PPR beneficiary; or
· land subject to a discretionary trust if an appointment of
a nominated beneficiary for the trust is in force, or an
appointment of a nominated PPR beneficiary for the
trust is in force and the land is used and occupied as the
principal place of residence of the nominated PPR
beneficiary; or
· land subject to an excluded trust.
13
Section 51(4) provides that section 51 is subject to sections 52
and 52A.
Section 51(5) provides that a trustee of child maintenance land
who would be liable to land tax in accordance with section 51(1)
but for this sub-section, is liable to land tax as determined under
clauses 7, 8 or 9 of the Second Schedule and is to be assessed for
that tax as if the child maintenance land were the only land
owned by the trustee.
Section 52 provides for the imposition of land tax for fixed trusts
if beneficial interests are notified to the Commissioner of State
Revenue.
Section 52(1) provides that a trustee of a fixed trust to which land
is subject may lodge with the Commissioner a written notice of
the beneficial interests in the land.
Section 52(2) provides that these notices must be in the form and
contain the information determined by the Commissioner and be
lodged with the Commissioner on or before certain dates,
depending on whether the land is pre-2006 land or post-2006
land.
Section 52(3) provides that a notice takes effect for the 2006
tax year, if it is lodged on or before 30 June 2006 in respect of
pre-2006 land or in any other case, for the tax year after the year
in which the notice is lodged and remains in force until it is
withdrawn by the trustee.
Section 52(4) provides that if a notice is in force under this
section for a fixed trust--
· a beneficiary of the trust is deemed to be the owner, but
not to the exclusion of the trustee, of land subject to the
trust that bears the same proportion to the whole of the
land subject to the trust as the beneficiary's beneficial
interest in land subject to the trust bears to the total
beneficial interests in land subject to the trust, and is to
be assessed for land tax on that land accordingly,
together with any other land owned by the beneficiary,
in accordance with clause 7, 8 or 9 of the Second
Schedule; and
· the trustee of the trust is to be assessed for land tax on
the whole of the land subject to the trust in accordance
with clause 7, 8 or 9 of the Second Schedule as if the
land were the only land owned by the trustee.
14
Section 52(5) provides that there is to be deducted from the land
tax payable by a beneficiary under sub-section (4)(a) an amount
(if any) necessary to avoid double taxation being the lesser of the
amounts calculated according to two formulas.
Section 52(6) provides that, for the purposes of this section, the
trustee's right of indemnity from the trust property is taken not to
be a beneficial interest in the land subject to a trust.
Section 52(7) provides that sub-section (4)(a) does not apply for
a beneficiary who holds a beneficial interest as trustee of another
trust. Section 52B(1)(a) deems such a person to be the owner of
land.
Section 52A provides for the imposition of land tax for unit trust
schemes if the unitholdings are notified to the Commissioner of
State Revenue. It provides an equivalent scheme for the taxation
of trustees and unitholders of unit trust schemes as that which is
provided in section 52 for the taxation of trustees and
beneficiaries of fixed trusts.
Section 52B(1) provides that for the purposes of this Act--
· a person who holds a beneficial interest in land subject
to a fixed trust in respect of which a notice is in force
under section 52 (referred to as "the first trust") as
trustee of another trust (referred to as "the second trust")
is deemed to be the owner of land subject to the first
trust that bears the same proportion to the whole of the
land subject to the first trust as the person's beneficial
interest in the land subject to the first trust bears to the
total beneficial interests in land subject to the first trust.
· a person who holds units in a unit trust scheme in
respect of which a notice is in force under section 52A
(referred to as "the first scheme") as trustee of another
trust (referred to as "the second trust") is deemed
(for the purposes of the Act other than Part IIA) to be
the owner of land subject to the first scheme that bears
the same proportion to the whole of the land subject to
the first scheme as the person's unitholding in the first
scheme bears to the total unitholdings in the first
scheme.
Section 52B(2) provides that a person referred to in section
52B(1) is called a "beneficiary/trustee."
15
Section 52B(3) provides that there is to be deducted from the
land tax payable by a beneficiary/trustee on land that is subject to
the second trust an amount (if any) necessary to avoid double
taxation being the lesser of the amounts calculated according to
two formulas.
Section 52C provides that a trustee of an excluded trust is to be
assessed for land tax on the whole of the land subject to the trust
as if the land were the only land owned by the trustee. The land
tax is to be assessed in accordance with clause 7, 8 or 9 of the
Second Schedule.
Section 52D provides that the trustee of a discretionary trust may
nominate a person to be the nominated beneficiary of the trust
for the purposes of the Act. The section only applies to a
discretionary trust where the trust property includes any
pre-2006 land. The section also provides who may be nominated
as a nominated beneficiary, when a nomination must be made,
the form in which it must be made, when it comes into effect and
remains in force until, and the circumstances in which a trustee
may make a further nomination.
Section 52E applies in cases where the nomination of a
nominated beneficiary for a discretionary trust is in force under
section 52D. In these cases, the nominated beneficiary is deemed
to be the owner of the pre-2006 land subject to the trust for the
purposes of the Act other than Part IIA (but not to the exclusion
of a trustee), and is to be assessed for land tax on that land,
together with any other land owned by the nominated
beneficiary, in accordance with clause 7, 8 or 9 of the
Second Schedule. The trustee is to be assessed in accordance
with clause 7, 8 or 9 of the Second Schedule in respect of any
pre-2006 land subject to the trust, and in accordance with
clause 10, 11 or 12 of the Second Schedule in respect of any
post-2006 land subject to the trust. Section 52E(4) provides a
formula for assessing the trustee in circumstances where the trust
property includes both pre-2006 land and post-2006 land.
Section 52E(5) provides that any land tax payable by the trustee
in respect of pre-2006 land is to be deducted from the land tax
payable by the nominated beneficiary.
Section 52F provides that the trustee of a unit trust scheme or
discretionary trust may nominate a person to be the nominated
PPR beneficiary of the scheme or trust. The section also
provides who may be nominated as a nominated PPR beneficiary,
when a nomination comes into effect and remains in force until,
and the circumstances in which a trustee may make a further
nomination. Section 52F does not apply to a unit trust scheme if
a notice is in force for the scheme under section 52A.
16
Section 52G applies in cases where the nomination of a
nominated PPR beneficiary for a unit trust scheme or
discretionary trust is in force under section 52F. In these cases,
the trustee is to be assessed for land tax on land subject to the
scheme or trust that is used and occupied as the PPR of the
nominated PPR beneficiary as if the land were the only land
owned by the trustee. This assessment is to be calculated in
accordance with clause 7, 8 or 9 of the Second Schedule (as the
case may be).
Section 52H provides that a trustee of a trust who pays land tax
assessed on land subject to the trust is entitled to recoup the
amount of the tax from any trust property that is subject to the
trust or any like trust.
Section 52I provides that a person who holds land in Victoria on
trust on the relevant day must lodge a written notice with the
Commissioner on or before 31 December 2005. The notice must
be in the form and contain the information determined by the
Commissioner. The term "relevant day" is defined to mean the
day on which this Bill receives Royal Assent.
Section 52J provides the ongoing requirements for trustees to
notify the Commissioner of certain things, including where a
person becomes a trustee of land in Victoria, where a trustee
disposes of any land, or where anything happens that results in a
trust to which Victorian land is subject becoming a different
category of trust. The term "category of trust" is also defined,
to mean a fixed trust, a unit trust scheme, a discretionary trust or
an excluded trust.
Clause 21 inserts into the Second Schedule of the Land Tax Act 1958 the
land tax surcharge rates for trusts for 2006, 2007, 2008 and
subsequent years.
PART 4--LAND TAX ACT 2005
Clause 22 Sub-clause (1)(a) inserts the following definitions into
section 3(1) of the Land Tax Act 2005--
"beneficiary" which is defined to mean, in relation to a
discretionary trust, a person (or a member of a class of
persons), in whom, by the terms of the trust, the whole or
any part of the trust property may be vested in the event of
the exercise of a power or discretion in favour of the person
or in the event that a discretion conferred under the trust is
not exercised;
17
"child maintenance land" which is defined to mean land held
on trust that was transferred to the trustee for the benefit of
a beneficiary as the result of a family breakdown under
section 102AGA of the Income Tax Assessment Act 1936
(Cwlth);
"Commonwealth Superannuation Act" which is defined to
mean the Superannuation Industry (Supervision) Act 1993
(Cwlth);
"concessional trust" which is defined to mean a trust of which
each beneficiary is a person in respect of whom a
guardianship or administration order is in force under the
Guardianship and Administration Act 1986 or a person
with a disability within the meaning of the Disability
Services Act 1991 or a trust created under a Supreme
Court order for the benefit of a person under a disability;
"discretionary trust" which is defined to mean a trust under
which the vesting of the whole or part of the trust property
is required to be determined by a person either in respect of
the identity of the beneficiaries or the quantum of the
interest to be taken or both or will occur in the event that a
discretion conferred under the trust is not exercised.
The definition does not include an excluded trust, a fixed
trust or a trust to which a unit trust scheme relates;
"excluded trust" which is defined to mean a charitable trust, a
concessional trust, a public unit trust scheme, a wholesale
unit trust scheme, a trust the sole beneficiary or
beneficiaries of which is a club referred to in section 73 or
the members of such a club, a trust established by a will
(but only during the period ending on the later of the 3rd
anniversary of the testator's death or a further period
approved by the Commissioner, or the 18th birthday of the
first beneficiary to turn 18 if, at the testator's death, all the
potential beneficiaries are minors) and a trust for any tax
year in relation to which it is a superannuation trust;
"fixed trust" which is defined to mean a trust that is not an
excluded trust, a discretionary trust or a trust to which a
unit trust scheme relates;
"listed trust" which is defined to have the same meaning as in
the Duties Act 2000;
"nominated beneficiary" of a discretionary trust, which is
defined to mean a person nominated under section 46F of
the Act;
18
"nominated PPR beneficiary" which is defined to mean a
person nominated under section 46H of the Act;
"pre-2006 land" which is defined to mean, in relation to a trust,
land that was subject to that trust at midnight on
31 December 2005;
"post-2006 land" which is defined to mean, in relation to a trust,
land that became subject to that trust on or after 1 January
2006;
"public unit trust scheme" which is defined to mean a listed
trust, a widely held trust or a registered imminent public
unit trust scheme or registered declared public unit trust
scheme (within the meaning of the Duties Act 2000);
"superannuation trust" which is defined to mean in relation to
a tax year--
· for a trust established on or before 30 June in the
year preceding the tax year that, in relation to the
year of income ending in that year, is a
complying superannuation fund, a complying
approved deposit fund or a pooled
superannuation trust within the meaning of the
Commonwealth Superannuation Act;
· for a trust established after 30 June in the year
preceding the tax year that, as at midnight on
31 December in that year, is a regulated
superannuation fund (or taken to be a regulated
superannuation fund), an approved deposit fund
or a pooled superannuation trust within the
meaning of the Commonwealth Superannuation
Act;
"trust" which is defined to not include an implied or a
constructive trust;
"unit" which is defined to mean, in a unit trust scheme, a right
or interest (whether described as a unit or a sub-unit or
otherwise) of a beneficiary under the scheme, or a right to
any such right or interest, that entitles the beneficiary to
participate proportionately with other unitholders in a
distribution of the property of the trust on its vesting;
19
"unit trust scheme" which is defined to mean an arrangement
made for the purpose or having the effect of providing
facilities for participation by a person, as a beneficiary
under a trust, in any profit or income arising from the
acquisition, holding, management or disposal of property
under the trust, but does not include an excluded trust;
"wholesale unit trust scheme" which is defined to mean a unit
trust scheme that is registered under Division 7 of Part 2 of
Chapter 3 of the Duties Act 2000 as a wholesale unit trust
scheme, an imminent wholesale unit trust scheme or a
declared wholesale unit trust scheme;
"widely held trust" which is defined to have the same meaning
as that term would have in the Duties Act 2000 if a
reference in paragraph (b) of the definition of "widely held
trust" in section 3(1) of that Act to "300 registered
unitholders" were a reference to "50 registered
unitholders".
Sub-clause (1)(b) provides that in the definition of "trustee", the
phrase "express or implied" is be omitted.
Sub-clause (2) inserts a new section 3(3) into the Land Tax Act
2005, stating that for the purposes of paragraph (f)(i) of the
definition of "excluded trust" in section 3(1), the Commissioner
may approve a further period in any particular case.
Clause 23 substitutes a new section 18 of the Land Tax Act 2005 to
provide that beneficiaries of certain trusts are deemed to be
owners of land under Division 2A of Part 3 of the Act.
Clause 24 inserts a note at the end of section 35(1) of the Land Tax Act
2005, stating that Schedule 1 of the Act sets out 3 different rates
of land tax--Part 1 sets out the general rates of land tax, Part 2
sets out the rate of land tax on transmission easements and Part 3
sets out the land tax surcharge rates for trusts.
Clause 25 inserts at the end of section 38(5) of the Land Tax Act 2005 a
new section 38(6), which provides that if a joint owner of land is
a trustee of a trust to which the land is subject, no regard is to be
had to the existence of the trust in relation to the joint assessment
of joint owners under section 38(2), but regard is to be had to the
existence of a trust in relation to the separate assessment of the
joint owners as referred to in section 38(3).
Clause 26 repeals section 44 of the Land Tax Act 2005 as the subject-
matter of that section is now covered by new Division 2A of
Part 3.
20
Clause 27 inserts after Division 2 of Part 3 of the Land Tax Act 2005, a
new Division 2A, which deals with land held on trust.
Section 46A provides a land tax surcharge for trusts.
Section 46A(1) provides that the rate of land tax which applies
for trustees is set out in Part 3 of Schedule 1.
Section 46A(2) provides that the trustee who is assessed for land
tax under section 46A(1) is to be assessed on the whole of the
land subject to the trust as if the land were the only land owned
by the trustee.
Section 46A(3) provides that section 46A does not apply to
certain types of land held in trust, that is--
· land subject to a unit trust scheme if an appointment of
a nominated PPR beneficiary for the scheme is in force
and the land is used and occupied as the principal place
of residence of the nominated PPR beneficiary; or
· land subject to a discretionary trust if an appointment of
a nominated beneficiary for the trust is in force, or an
appointment of a nominated PPR beneficiary for the
trust is in force and the land is used and occupied as the
principal place of residence of the nominated PPR
beneficiary; or
· land subject to an excluded trust.
Section 46A(4) provides that section 46A is subject to
sections 46B and 46C.
Section 46A(5) provides that a trustee of child maintenance land
who would be liable to land tax in accordance with
section 46A(1) but for this sub-section, is liable to land tax at the
applicable rate set out in Part 1 of Schedule 1 and is to be
assessed for that tax as if the child maintenance land were the
only land owned by the trustee.
Section 46B provides for the imposition of land tax for fixed
trusts if beneficial interests are notified to the Commissioner of
State Revenue.
Section 46B(1) provides that a trustee of a fixed trust to which
land is subject may lodge with the Commissioner a written notice
of the beneficial interests in the land.
21
Section 46B(2) provides that these notices must be in the form
and contain the information determined by the Commissioner and
be lodged with the Commissioner on or before certain dates,
depending on whether the land is pre-2006 land or post-2006
land.
Section 46B(3) provides that a notice takes effect for the 2006
tax year, if it is lodged on or before 30 June 2006 in respect of
pre-2006 land or in any other case, for the tax year after the year
in which the notice is lodged and remains in force until it is
withdrawn by the trustee.
Section 46B(4) provides that if a notice is in force under this
section for a fixed trust--
· a beneficiary of the trust is deemed to be the owner, but
not to the exclusion of the trustee, of land subject to the
trust that bears the same proportion to the whole of the
land subject to the trust as the beneficiary's beneficial
interest in land subject to the trust bears to the total
beneficial interests in land subject to the trust, and is to
be assessed for land tax on that land accordingly,
together with any other land owned by the beneficiary,
at the applicable rate set out in Part 1 of Schedule 1; and
· the trustee of the trust is to be assessed for land tax on
the whole of the land subject to the trust at the
applicable rate set out in Part 1 of Schedule 1, as if the
land were the only land owned by the trustee.
Section 46B(5) provides that there is to be deducted from the
land tax payable by a beneficiary under sub-section (4)(a) an
amount (if any) necessary to avoid double taxation being the
lesser of the amounts calculated according to two formulas.
Section 46B(6) provides that, for the purposes of this section, the
trustee's right of indemnity from the trust property is taken not to
be a beneficial interest in the land subject to a trust.
Section 46B(7) provides that sub-section (4)(a) does not apply for
a beneficiary who holds a beneficial interest as trustee of another
trust. Section 46D(1)(a) deems such a person to be the owner of
land.
22
Section 46C provides for the imposition of land tax for unit trust
schemes if the unitholdings are notified to the Commissioner of
State Revenue. It provides an equivalent scheme for the taxation
of trustees and unitholders of unit trust schemes as that which is
provided in section 46B for the taxation of trustees and
beneficiaries of fixed trusts.
Section 46D(1) provides that for the purposes of this Act--
· a person who holds a beneficial interest in land subject
to a fixed trust in respect of which a notice is in force
under section 46B (referred to as "the first trust") as
trustee of another trust (referred to as "the second trust")
is deemed to be the owner of land subject to the first
trust that bears the same proportion to the whole of the
land subject to the first trust as the person's beneficial
interest in the land subject to the first trust bears to the
total beneficial interests in land subject to the first trust;
· a person who holds units in a unit trust scheme in
respect of which a notice is in force under section 46C
(referred to as "the first scheme") as trustee of another
trust (referred to as "the second trust") is deemed
(for the purposes of the Act other than Division 1 of
Part 4) to be the owner of land subject to the first
scheme that bears the same proportion to the whole of
the land subject to the first scheme as the person's
unitholding in the first scheme bears to the total
unitholdings in the first scheme.
Section 46D(2) provides that a person referred to in section
46D(1) is called a "beneficiary/trustee".
Section 46D(3) provides that there is to be deducted from the
land tax payable by a beneficiary/trustee on land that is subject to
the second trust an amount (if any) necessary to avoid double
taxation being the lesser of the amounts calculated according to
two formulas.
Section 46E provides that a trustee of an excluded trust is to be
assessed for land tax on land subject to the trust as if the land
were the only land owned by the trustee. The rate of land tax for
this assessment is the applicable rate set out in Part 1 of
Schedule 1.
23
Section 46F provides that the trustee of a discretionary trust may
nominate a person to be the nominated beneficiary of the trust
for the purposes of the Act. The section applies only to a
discretionary trust where the trust property includes any pre-2006
land. The section also provides who may be nominated as a
nominated beneficiary, when a nomination must be made, the
form in which it must be made, when it comes into effect and
remains in force until, and the circumstances in which a trustee
may make a further nomination.
Section 46G applies in cases where the nomination of a
nominated beneficiary for a discretionary trust is in force under
section 46F. In these cases, the nominated beneficiary is deemed
to be the owner of the pre-2006 land subject to the trust for the
purposes of the Act other than Division 1 of Part 4 (but not to the
exclusion of a trustee) and is to be assessed for land tax on that
land, at the applicable rate set out in Part 1 of Schedule 1 of the
Act. The trustee is to be assessed at the applicable rate set out in
Part 1 of Schedule 1 in respect of any pre-2006 land subject to
the trust, and at the applicable rate set out in Part 3 of Schedule 1
in respect of any post-2006 land subject to the trust.
Section 46G(4) provides a formula for assessing the trustee in
circumstances where the trust property includes both pre-2006
land and post-2006 land. Section 46G(5) provides that any land
tax payable by the trustee in respect of pre-2006 land is to be
deducted from the land tax payable by the nominated beneficiary.
Section 46H provides that the trustee of a unit trust scheme or
discretionary trust may nominate a person to be the nominated
PPR beneficiary of the scheme or trust. The section also
provides who may be nominated as a nominated PPR beneficiary,
when a nomination comes into effect and remains in force until,
and the circumstances in which a trustee may make a further
nomination. Section 46H does not apply to a unit trust scheme if
a notice is in force for the scheme under section 46C.
Section 46I applies in cases where the nomination of a nominated
PPR beneficiary for a unit trust scheme or discretionary trust is in
force under section 46H. In these cases, the trustee is to be
assessed for land tax on land subject to the scheme or trust that is
used and occupied as the PPR of the nominated PPR beneficiary
as if the land were the only land owned by the trustee. The rate
of land tax for this assessment is the applicable rate set out in
Part 1 of Schedule 1.
24
Section 46J provides that a trustee of a trust who pays land tax
assessed on land subject to the trust is entitled to recoup the
amount of the tax from any trust property that is subject to the
trust or any like trust.
Section 46K provides the ongoing requirements for trustees to
notify the Commissioner of certain things, including where a
person becomes a trustee of land in Victoria, where a trustee
disposes of any land, or where anything happens that results in a
trust to which Victorian land is subject becoming a different
category of trust. The term "category of trust" is also defined,
to mean a fixed trust, a unit trust scheme, a discretionary trust or
an excluded trust.
Clause 28 Sub-clause (1) makes a consequential amendment to section 52
of the Land Tax Act 2005 repealing the definitions of
"discretionary trust" and "unit trust scheme" in section 52(1), as
well as section 52(2), as these are now covered in section 3(1) of
the Act.
Sub-clause (2) substitutes a new section 67(6) of the Land Tax
Act 2005, which provides that, for the purposes of section 67--
· a reference to the issued share capital of a company
does not include a reference to any part of it that carries
no right to participate beyond a specified amount in a
distribution of either profits or capital (this re-enacts the
current section 67(6));
· a reference to an owner of land does not include a
reference to a beneficiary of a trust or a unitholder in a
unit trust scheme to which the land is subject.
Clause 29 substitutes a new section 80(3) of the Land Tax Act 2005, which
provides that section 80(2)(a) does not apply to land or part of
land--
· that is leased or occupied under or in accordance with
an arrangement made with a municipal council for the
purpose of promoting or assisting a decentralised
industry (this re-enacts the current 80(3)); or
· that is used or occupied by persons carrying on business
in movable stalls in a market during some but not all of
the ordinary business hours of the week.
25
The purpose of this amendment is to reinsert the movable stall
exemption which was contained in section 9(2B)(a) of the Land
Tax Act 1958 for public statutory authority land and was
inadvertently omitted in the land tax rewrite process. There was
never an intention to omit the movable stall exemption from the
new Act.
Clause 29 also substitutes a new section 81(3) of the Land Tax
Act 2005, which provides that section 81(2) does not apply to
land or part of land--
· that is leased or occupied under or in accordance with
an arrangement made with a municipal council for the
purpose of promoting or assisting a decentralised
industry (this re-enacts the current 81(3)); or
· that is used or occupied by persons carrying on business
in movable stalls in a market during some but not all of
the ordinary business hours of the week; or
· that is used exclusively for in or in connection with a
business the primary purpose of which is to provide
outdoor sporting or recreational facilities.
The purpose of this amendment is to reinsert the movable stall
and sporting and recreational facilities exemptions which were
contained in section 9(2B) of the Land Tax Act 1958 for
municipal and public land and were inadvertently omitted in the
land tax rewrite process. There was never an intention to omit
these exemptions from the new Act.
Clause 30 inserts into Schedule 1 of the Land Tax Act 2005 a new Part 3,
which provides the land tax surcharge rates for trusts in 2006,
2007, 2008 and subsequent years.
Clause 31 inserts into Schedule 3 of the Land Tax Act 2005, after clause 7,
transitional provisions for notices under the trusts regime
(clause 8), an amnesty for failing to lodge certain documents
(clause 9), and a continuation of certain Orders made under the
Land Tax Act 1958 (clause 10).
26