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STATE TAXATION ACTS FURTHER AMENDMENT BILL 2009

             State Taxation Acts Further
                Amendment Bill 2009

                         Introduction Print

               EXPLANATORY MEMORANDUM


                                   General
The Bill amends the First Home Owner Grant Act 2000 to impose a cap on
the value of certain transactions that will be eligible for the First Home
Owner Grant.
The Bill also amends the Land Tax Act 2005 to--
             clarify the scope of the exemption from land tax in relation to
              Crown land;
             clarify certain provisions relating to land held on trust;
             confirm who is liable to pay land tax where land is transferred
              without valuable consideration but the transfer remains
              unregistered and that a refund is available where unoccupied
              land is subsequently used as a principal place of residence and
              no other principal place of residence exemption had been
              claimed;
             require a person who is served with a notice of assessment of
              land tax to notify the Commissioner of State Revenue of
              certain errors or omissions.
The Payroll Tax Act 2007 is amended to introduce new nexus provisions to
clarify when and where wages are taxable.
The Taxation (Reciprocal Powers) Act 1987 is repealed and the Taxation
Administration Act 1997 is amended to--
             re-enact and modernise the law relating to the reciprocal
              enforcement of taxation laws;
             provide for penalties for notification defaults;



561372                                 1     BILL LA INTRODUCTION 14/10/2009

 


 

permit the disclosure of information obtained under the administration of a taxation law for the purposes of administering the First Home Owner Grant 2000 and the Unclaimed Money Act 2008; confirm that the Commissioner of State Revenue is able to serve Victorian court processes in the same manner that the Commissioner serves documents for the purposes of a taxation law. Clause Notes PART 1--PRELIMINARY Part 1 of the Bill outlines the main purposes of the Bill and contains the commencement provisions. Clause 1 outlines the main purposes of the Bill. Clause 2 provides that Part 1 and Part 7 of the proposed Act come into operation on the day on which the Act receives the Royal Assent. Part 2, which relates to the First Home Owner Grant Act 2000, comes into operation on 1 January 2010. Division 1 of Part 3 is deemed to have come into operation on 1 January 2006. This is the date the land tax trust provisions, to which this Division relates, came into operation. The purpose of the amendments is to ensure that trustees of implied and constructive trusts are not disadvantaged. Division 2 of Part 3 and Divisions 2 and 3 of Part 5 come into operation on the day after the day on which this proposed Act receives Royal Assent. Part 4 is deemed to have to have come into operation on 1 July 2009, this being the start of the most recent financial year. Division 1 of Part 5 and Part 6 come into operation on a day to be proclaimed or 1 October 2010, whichever is the earlier. PART 2--FIRST HOME OWNER GRANT ACT 2000 Part 2 of the Bill makes amendments to the First Home Owner Grant Act 2000 to cap the value of transactions eligible for the grant but excludes primary production properties from that cap. Clause 3 Subclause (1) amends the wording in section 13(1) of the First Home Owner Grant Act 2000 to make an eligible transaction subject to the new eligible property value cap. 2

 


 

Subclause (2) inserts a new section 13(1A) which provides that eligibility for the First Home Owner Grant from 1 January 2010 is to be determined by reference to the value of the property being purchased, so that the consideration for an eligible transaction with a commencement date that is on or after 1 January 2010 must not exceed $750 000. Subclause (3) inserts new sections 13(9) and 13(10). New section 13(9) excludes from the application of the eligible property value cap an eligible transaction relating to a home that is on, or to be built on, land referred to in section 65 or 66 of the Land Tax Act 2005. This relates to land that is situated outside greater Melbourne that is used primarily for primary production and primary production land that is situated in greater Melbourne but not in an urban zone. New section 13(10) extends the exception from the eligible property value cap to an eligible transaction relating to a home that is on, or to be built on, land referred to in section 67(1)(a) of the Land Tax Act 2005. This relates to land that is primary production land in an urban zone in greater Melbourne and will apply if the applicant-- is, or, when the contract for the purchase of the home or the comprehensive building contract is completed, will be, the owner of the land within the meaning of section 67(2)(a) of the Land Tax Act 2005; or holds an interest in the shares of a proprietary company described in section 67(2)(b) (as affected by that section) of the Land Tax Act 2005 and the interest entitles the applicant to exclusive occupation of a specified home owned by the company or which will be owned by the company, when a contract for the purchase of the specified home or a comprehensive building contract for the building of the specified home is completed. The section also requires that the value of the shares is not less than the value of the company's interest in the home. Subclause (3) also provides that an applicant must continue to comply with the conditions under the new section 10(a)(i) and (ii) (as the case requires) until the end of the period that the applicant is required under section 12 (residence requirement) to occupy the home. 3

 


 

PART 3--LAND TAX ACT 2005 Part 3 of the Bill makes amendments to the Land Tax Act 2005. Clause 4 amends the definition of trust to signify that the Land Tax Act 2005 has express provisions relating to an implied or constructive trust. Clause 5 inserts a new Division 2B in Part 3 of the Land Tax Act 2005 which provides for the tax treatment of land held under implied or constructive trusts. The new Division includes two new sections, sections 46L and 46M. Section 46L provides for land owned by the trustee of an implied or constructive trust to be separately assessed as if the land were the only land owned by the trustee. Where a trustee holds land as trustee of more than one implied or constructive trust for the same beneficiary or beneficiaries, the lands held subject to those trusts are to be assessed as if the lands were the only lands owned by the trustee. The new section 46M provides the trustee who has paid land tax assessed on the trust land with an entitlement to recoup the tax from any trust property that is subject to the trust. Clause 6 makes various amendments to section 10 of the Land Tax Act 2005 which provides that a lessee of Crown land or a licensee of Crown land, whether the land is leased or licensed directly from the Crown or indirectly via a committee of management, is regarded as an owner. Subclause (1) amends section 10(b) to deem a person entitled to land under a lease of Crown land to be an owner for land tax purposes. Subclause (2) amends section 10(c) to deem a person entitled to land under a licence of Crown land (where the person has a right of acquiring the fee simple) to be an owner for land tax purposes. Subclause (3) inserts a new section 10(2) which provides that a person entitled to land under a sub-lease of Crown land is not an owner. This ensures that the head lessee is the person deemed to be the owner and not a sub-lessee. Clause 7 inserts a new section 16A which deals with disposition of land for no valuable consideration and broadly intends to replicate section 49(5) of the Land Tax Act 1958. Subclause (1) provides that the Commissioner may determine that a person who has disposed of land is not the owner of that land if the Commissioner is satisfied that the person has disposed of the land for no valuable consideration, the disposition of the 4

 


 

land was made in good faith and not for the purposes of evading land tax, and the person to whom the land was disposed of had taken possession of the land on or before midnight on 31 December in the year preceding the tax year. Subclause (2) provides that if the Commissioner makes a determination under subsection (1), the person who disposed of the land is deemed not to be the owner and the person to whom the land was disposed for no valuable consideration is deemed to be the owner. Subclause (3) provides that subsection (2) applies whether or not the person to whom the land was disposed of is the registered proprietor. Subclause (4) defines dispose of to mean dispose of by way of settlement, grant, assignment, transfer or conveyance. Clause 8 amends section 45(1) to replace "lease from the Crown" with "lease of Crown land". Clause 9 Subclause (1) substitutes paragraphs (a) and (b) of section 46A(3). The amendment adds an additional condition so that section 46A does not apply to land subject to a unit trust scheme or a discretionary trust where an appointment of a nominated PPR beneficiary for the scheme or the trust is in force, so long as the land is not used to carry on a substantial business activity. Subclause (2) provides that the factors referred to in section 62(2) must be taken into account in determining whether land is used by a person to carry on a substantial business activity. Clause 10 inserts new subsections (4) and (5) after section 46I(3). Subclause (4) provides that subsection (2) does not apply if the land is used to carry on a substantial business activity. Subclause (5) provides that the factors referred to in section 62(2) must be taken into account in determining whether land is used by a person to carry on a substantial business activity. Clause 11 amends sections 61(3)(c) and 61(4)(c) to replace the word "Part" with the word "Division". The amendment addresses an anomaly and ensures that an owner of unoccupied land, which is subsequently used as their principal place of residence, is entitled to a refund of tax paid for the relevant preceding years so long as the owner was not entitled to a principal place of residence exemption for any other land. 5

 


 

The inclusion of the word "Part" has meant that not only did the owner have to demonstrate that he or she was not entitled to a principal place of residence exemption for any other land but also that he or she was not entitled to any exemption under Part 4 of the Land Tax Act 2005 in respect of any other land, which includes exemptions for primary production land, rooming houses and caravan parks. Clause 12 substitutes paragraph (a) of section 79(2) to exclude land under a lease of Crown land from being exempt, unless the lease is a retail premises leases as defined in the Retail Leases Act 2003. Therefore, a lease of Crown land that is a retail premises lease is exempt from land tax. The clause also inserts a new paragraph (c) which excludes Crown land from being exempt where the land is held by a person who is entitled to the land under a licence of Crown land under which the person has a right, absolute or conditional, of acquiring the fee simple. This addresses an anomaly in the Act whereby a person holding Crown land under a licence with the right to acquire the fee simple is deemed to be the owner but section 79 of the Act applies to exempt the land from land tax. The amendment rectifies the anomaly and ensures that Crown land is not exempt in these circumstances. Clause 13 amends the heading to Division 1 of Part 7 to "Notices and certificates". Clause 14 inserts a new section 104A into the Land Tax Act 2005. Subclause (1) requires the owner of land who is served with a notice of assessment to notify the Commissioner of any error or omission in the notice relating to any land owned by the person (or in the case of an assessment notice for jointly owned land, any land jointly owned by the joint owners) but not included in the notice or any land specified in the notice as exempt land that is not exempt (for example, land that is specified as exempt land as the principal place of residence of the owner when it is not in fact used and occupied as their principal place of residence). Subclause (2) provides that the notification must be made within 60 days from the date of the issue of the assessment notice. Subclause (3) provides that in the case of joint owners, it is sufficient compliance with the provision if one of the owners provides the required information on behalf of all of them. This allows a joint owner who was not served with the notice to notify the Commissioner of any errors or omissions in lieu of the person who was served with the notice. 6

 


 

PART 4--PAYROLL TAX ACT 2007 Part 4 of the Bill makes a range of amendments to the Payroll Tax Act 2007 which introduce new nexus provisions. The amendments do not change the nexus for wages paid or payable for services performed by an employee wholly in one jurisdiction in a month. They change the nexus for wages paid or payable to employees who work in more than one jurisdiction in a month. Clause 15 inserts new definitions into section 3(1) of the Payroll Tax Act 2007: ABN means the ABN (Australian Business Number) for an entity within the meaning of the A New Tax System (Australian Business Number) Act 1999 of the Commonwealth. Australian jurisdiction means a State or a Territory. instrument includes a cheque, bill of exchange, promissory note, money order or a postal order issued by a post office. registered business address means an address for service of notices under the A New Tax System (Australian Business Number) Act 1999 of the Commonwealth on an entity that has an ABN, as shown in the Australian Business Register kept under that Act. Clause 16 substitutes sections 10 and 11. New section 10 provides that taxable wages are wages (as defined in section 13 of the Payroll Tax Act 2007) that are taxable in Victoria, but do not include exempt wages. New section 11 provides the jurisdictional nexus for determining whether wages are taxable in Victoria and a number of related rules on how to apply the nexus. Subclause (1)(a) provides that wages are taxable in this jurisdiction if the wages relate to services performed wholly in this jurisdiction. This is regardless of where the wages are paid or payable. Subclause (1)(b) provides the jurisdictional nexus for wages relating to services performed in two or more Australian jurisdictions, or partly in one or more Australian jurisdictions and partly outside all Australian jurisdictions. The nexus in paragraphs (i) to (iv) must be applied in sequence. The primary nexus is whether the employee is based in this jurisdiction as determined by new section 11A. The secondary nexus is whether the employer is based in this jurisdiction, as determined by new section 11B. The third nexus is whether the wages are paid or payable in this jurisdiction, as determined by new section 11C. 7

 


 

The last nexus is whether the relevant services are performed mainly in this jurisdiction. Subclause (1)(c) provides the jurisdictional nexus for wages relating to services performed wholly outside all Australian jurisdictions. The wages are taxable in this jurisdiction if the wages are paid or payable in this jurisdiction, as determined by new section 11C. Note that new section 66A exempts wages paid or payable for services performed wholly in one or more other countries for a continuous period of more than 6 months. Subclause (2) provides that, in determining the question of whether wages are taxable in this jurisdiction, regard must be had only to the services performed during the month in respect of which the question arises, subject to new section 11. Subclause (3) deems wages paid or payable by an employer in respect of an employee in a particular month to be related to services performed by that employee in respect of the employer during that month. A note is included to provide an example of how the provision operates. Subclause (4) operates when no services are performed by an employee during the month in which wages are paid or payable. In determining whether the wages are taxable in this jurisdiction, the nexus must be applied by reference to services performed by the employee during the most recent prior month in which the employee did perform services in respect of the employer. The wages are deemed to be related to services performed by that employee in that most recent prior month. Subclause (5) operates when no services have been performed by an employee during the month in which wages are paid or payable or in any prior month. For the purpose of determining whether the wages are taxable in this jurisdiction, services are deemed to have been performed at a place or places where it may be reasonably expected that the services will be performed; and the wages are deemed to be related to services performed by the employee in the month in which the wages are paid or payable. Subclause (6) provides that, for the purpose of determining whether the wages are taxable in this jurisdiction, all amounts of wages paid or payable in the same month by the same employer in respect of the same employee are to be aggregated. A note is included to provide an example how the provision operates. Subclause (7) provides that if wages are paid in a different month from the month in which they are payable, the question of whether the wages are taxable in this jurisdiction is to be determined by reference to the earlier month. 8

 


 

New section 11A sets out the principles to be applied to determine in which jurisdiction an employee is based. They are relevant to the application of the nexus in new section 11(1)(b)(i). Subclause (1) provides that the jurisdiction in which an employee is based is where the employee's principal place of residence is located. Subclause (2) provides that, to determine the jurisdiction in which an employee is based, regard must be had only to the state of affairs existing during the month in which the relevant wages are paid or payable. Subclause (3) clarifies that, if more than one jurisdiction would qualify as the jurisdiction in which an employee is based during a month, the question must be determined by having regard to the state of affairs existing on the last day of that month. Subclause (4) provides that, if an employee does not have a principal place of residence, the employee is taken not to be based in an Australian jurisdiction. Subclause (5) provides that, in the case of wages paid or payable to a corporate employee, the jurisdiction in which the employee is based is to be determined pursuant to the new section 11B. This ensures that, when an employee is a corporate employee as opposed to a natural person, the principles in new section 11B are used to determine the jurisdiction in which the corporate employee is based. Subclause (6) defines a corporate employee to mean a company that is taken to be an employee under section 34 or 39, or a company to whom a payment is made that is taken to be wages under section 42 or 47. New section 11B sets out the principles to be applied to determine in which jurisdiction an employer is based. They are relevant to the application of the nexus in new section 11(1)(b)(ii). Subclause (1) provides that the jurisdiction in which an employer is based is where the employer's registered business address is located or, if the employer does not have an ABN, the jurisdiction in which the employer's principal place of business is located. Subclause (2) provides that if an employer carries on a business under a trust, the employer's registered business address is the trust's registered business address or, if the trust does not have an ABN, the trustee's registered business address. 9

 


 

Subclause (3) ensures that, if an employer has registered business addresses in different jurisdictions at the same point in time, the jurisdiction in which the employer is based at that point is where the employer's principal place of business is located. Subclause (4) provides that, to determine the jurisdiction in which an employer is based, regard must be had only to the state of affairs existing during the month in which the relevant wages are paid or payable. Subclause (5) clarifies that if more than one jurisdiction would qualify as the jurisdiction in which an employer is based during a month, the question must be determined by having regard to the state of affairs existing on the last day of that month. Subclause (6) provides that if an employer has neither a registered business address nor a principal place of business, the employer is taken not to be based in an Australian jurisdiction. New section 11C sets out the principles to be applied to determine the place and date of payment of wages. They are relevant to the application of the nexus in new section 11(1)(b)(iii) and 11(1)(c). Subclauses (1) and (2) provide a method for determining the place and date, respectively, that wages are taken to have been paid, where the payment is made by way of an instrument or transfer or crediting in accordance with an instruction. The provisions are similar to the former section 10(3) of the Payroll Tax Act 2007. Subclause (3) provides that wages are taken to be payable at the place at which they are paid, subject to new section 11. Subclause (4) provides a method for determining the place that wages are taken to be paid, when wages become payable but are not paid by the end of the month. The wages are taken to be payable at the place where wages were last paid or, if no wages have been previously paid, the place where the employee last performed services in respect of the employer. Subclause (5) ensures that, if wages are paid or payable by the same employer in respect of the same employee in more than one Australian jurisdiction during one month, the Australian jurisdiction in which the highest proportion of the wages are paid or payable is considered to be the jurisdiction in which those wages are paid or payable. 10

 


 

Clause 17 inserts a new subclause (3) to section 13 to clarify that the nexus provisions apply to wages referred to in section 13(1)(a) to (e) in the same way as they apply to wages paid or payable to an employee, as if a reference to an employee in this Act included a reference to any such person. Clause 18 omits section 24(4) which is a deeming provision in relation to wages constituted by the grant of shares or options to a director where no services are performed. A new note is inserted to clarify that the nexus provisions apply to such wages and to refer to new section 11 which deems wages to be paid or payable for services performed. Clause 19 omits section 25 which deems when services are considered to have been performed in relation to wages constituted by the grant of shares and options for the same reasons above. Clause 20 substitutes the note at the end of section 26(2) with a new note, as a consequence of the amendment to the nexus provisions, to clarify that section 26(2) will be relevant to applying the nexus in new section 11(1)(b)(iii) and 11(1)(c). Clause 21 inserts new Division 9 in Part 4 to exempt wages paid or payable in relation to services performed wholly in one or more other countries for a continuous period of more than 6 months. This is not a new exemption as such wages are excluded from taxable wages under the former section 10(1)(a)(ii) of the Payroll Tax Act 2007. Clause 22 inserts new clause 16 in Schedule 3 to set out transitional provisions associated with the enactment of the amendments. Subclause (1) provides that the amendments apply in respect of taxable wages paid or payable on or after 1 July 2009. Subclause (2) clarifies that the amendments are to be applied for the purpose of determining the correct amount of payroll tax (within the meaning of section 82) payable by an employer for the financial year commencing on 1 July 2009. Subclause (3) provides that section 9 continues to apply in respect of expired months as if the amendments had not been made. The effect of subclauses (2) and (3) is that employers are not required to adjust payroll tax in respect of expired months until the annual adjustment stage. Subclause (4) defines the meaning of an expired month. 11

 


 

PART 5--TAXATION ADMINISTRATION ACT 1997 Part 5 of the Bill makes amendments to the Taxation Administration Act 1997 including enacting modernised provisions for the reciprocal enforcement of taxation laws across jurisdictions as previously contained in the Taxation (Reciprocal Powers) Act 1987. Clause 23 amends section 1 of the Taxation Administration Act 1997 to extend the purpose of this Act to include the reciprocal enforcement of recognised laws. Clause 24 inserts new definitions into section 3 of the Taxation Administration Act 1997. corresponding Commissioner is defined as the person who is responsible for the general administration of the law that corresponds with the Taxation Administration Act 1997. This is-- the Commissioner for Australian Capital Territory Revenue in the Australian Capital Territory; the Chief Commissioner of State Revenue in New South Wales; the Commissioner of Territory Revenue in the Northern Territory; the Commissioner of State Taxation in South Australia; and the Commissioner of State Revenue in Tasmania; Western Australia, and Queensland. recognised jurisdiction means the Commonwealth, another State or Territory; and recognised law means a law administered by a corresponding Commissioner which relates to the imposition of a tax, duty or levy; or is declared by the Governor in Council, by Order published in the Government Gazette, as provided under new section 3(2), to be a recognised law. Together, these terms delineate the scope of the provisions which facilitate the reciprocal enforcement of recognised laws. Clause 25 amends the definition of a taxation law in section 4 of the Taxation Administration Act 1997 to remove the reference to the Taxation (Reciprocal Powers) Act 1987. 12

 


 

Clause 26 amends section 7(1) of the Taxation Administration Act 1997 to clarify that the Taxation Administration Act 1997 also provides for the reciprocal enforcement of recognised laws. Clause 27 substitutes the heading of section 76 of the Taxation Administration Act 1997 to reflect the nature of the powers provided by this section. Clause 28 inserts a new Division 2A into Part 9 of the Taxation Administration Act 1997 which facilitates investigations by corresponding Commissioners in Victoria and clarifies the Victorian Commissioner of State Revenue's power to seek to, and conduct authorised investigations in other jurisdictions. This Division also replaces Part 2 of the Taxation (Reciprocal Powers) Act 1987. The new section 90A of the Taxation Administration Act 1997 provides that the Commissioner may enter into an agreement with a corresponding Commissioner, which authorises the exercise of the investigative powers and functions found in Division 2, Part 9 of the Taxation Administration Act 1997, for the purposes of a recognised law in Victoria. Subclause (1)(a) provides that the authorisation may be granted in respect of an investigation conducted by the corresponding Commissioner, or as permitted under subclause (1)(b), by the Commissioner on behalf of the corresponding Commissioner. Subclause (2) makes it clear that any agreement formed between the Commissioner and the corresponding Commissioner may be subject to conditions imposed by either of the parties. Example A Company Pty Ltd is a Victoria-based company that operates in both New South Wales and Victoria and pays payroll tax in both jurisdictions. The NSW Chief Commissioner of State Revenue (NSW Chief Commissioner) wishes to visit the head office of A Company in Victoria to examine its compliance with the Payroll Tax Act 2007 (NSW). The NSW Chief Commissioner can do this by entering into an agreement with the Victorian Commissioner of State Revenue (Victorian Commissioner) under clause 90A(1)(a) which would authorise the NSW Chief Commissioner to exercise any of the functions found in Division 2, Part 9 of the Taxation Administration Act 1997 for the purposes of investigating, in Victoria, A Company's compliance with the Payroll Tax Act 2007 (NSW). The new section 90B of the Taxation Administration Act 1997 provides for the exercise of functions under Division 2. 13

 


 

Subclause (1) provides that for the purposes of an investigation authorised under clause 90A, and conducted by use of the powers and functions contained in Division 2, Part 9 of the Taxation Administration Act 1997, the terms "tax", "tax liability", "taxation law" and "offence against a taxation law" found within this Division will be read in the context of the recognised law. Subclause (2) applies where a corresponding Commissioner is authorised to exercise a function under Division 2, Part 9 of the Taxation Administration Act 1997 in respect of a recognised law. The terms "Commissioner", "authorised officer" and "authorised officer's identity card" will be read as a reference to the equivalent terms under the recognised law. Example The NSW Chief Commissioner has been authorised to exercise any of the functions found in Division 2, Part 9 of the Taxation Administration Act 1997 for the purposes of conducting an investigation into the compliance of A Company with the Payroll Tax Act 2007 (NSW). Within this context, the following references in Division 2, Part 9 of the Taxation Administration Act 1997 should be read as follows: any reference to "tax" will be read as a reference to payroll tax (as levied under the Payroll Tax Act 2007 (NSW)); any reference to "tax liability" will be read as a reference to a "payroll tax liability" under the Payroll Tax Act 2007 (NSW); any reference to "taxation law" will be read as a reference to the Payroll Tax Act 2007 (NSW); any reference to "offence against a taxation law" will be read as a reference to an "offence against the Payroll Tax Act 2007 (NSW)"; any reference to "the Commissioner" will be read as a reference to the NSW Chief Commissioner; any reference to "an authorised officer" will be read as a reference to an "authorised officer" under section 68 of Taxation Administration Act 1997 (NSW); and 14

 


 

any reference to "authorised officer's identity card" will be read as a reference to an identity card provided to the "authorised officer" under section 69 of the Taxation Administration Act 1997 (NSW). The new section 90C of the Taxation Administration Act 1997 enables an authorised officer to transfer an item seized under a search warrant granted under section 77 of the Taxation Administration Act 1997 (Vic) to the corresponding Commissioner or an authorised person acting on behalf of the corresponding Commissioner. The new section 90D of the Taxation Administration Act 1997 provides the Commissioner with the power to enter into agreements with corresponding Commissioners which enable the Commissioner to conduct investigations into taxation laws in recognised jurisdictions. Subclause (1)(a) enables the Commissioner to form an agreement which confers upon the Commissioner the power to exercise the investigative functions provided under a recognised law, for the purposes of a taxation law. Subclause (1)(b) enables the Commissioner to form an agreement under which the corresponding Commissioner will, on behalf of the Commissioner, exercise the investigative functions provided under a recognised law, for the purposes of a taxation law. Subclause (2) provides the Commissioner with the power to authorise any person who is authorised to exercise a function under Division 2, Part 9 of the Taxation Administration Act 1997 to exercise, on behalf of the Commissioner, any of the investigative functions conferred upon the Commissioner under subclause (1)(a). Subclause (3) provides that an investigative function includes any function under a recognised law which corresponds to the functions found in Division 2, Part 9 of the Taxation Administration Act 1997. Example B Company Pty Ltd is a NSW-based company which operates in both New South Wales and Victoria and pays payroll tax in both jurisdictions. As part of this year's compliance program, the Victorian Commissioner of State Revenue would like to visit B Company's head office in Sydney to examine its compliance with the Payroll Tax Act 2007 (Vic). 15

 


 

To do this, the Commissioner exercises the Commissioner's power under the new section 90D(1)(a) and enters into an agreement with the NSW Chief Commissioner of State Revenue which authorises the Commissioner to exercise any of the investigative functions found in Division 2, Part 9 of the Taxation Administration Act 1996 (NSW), which contains the functions which correspond to those found in Division 2, Part 9 of the Taxation Administration Act 1997 (Vic), to investigate the compliance of B Company with the Payroll Tax Act 2007 (Vic). The Commissioner subsequently, under section 90D(2), authorises Marc and Robert, both of whom are authorised to exercise the powers under Division 2, Part 9 of the Taxation Administration Act 1997 (Vic), to exercise the powers conferred upon the Commissioner under the agreement with the NSW Chief Commissioner of State Revenue, to visit B Company's office and examine its compliance with the Payroll Tax Act 2007 (Vic). The new section 90E of the Taxation Administration Act 1997 provides for a certificate of authority for investigations by a corresponding Commissioner in Victoria. Subclause (1) provides that the Commissioner must issue a certificate of authority to any person who is authorised by a corresponding Commissioner to exercise a function under Division 2, Part 9 of the Taxation Administration Act 1997, for the purposes of a recognised law. Subclause (2) provides that any person who seeks to exercise a function under Division 2, Part 9 of the Taxation Administration Act 1997 on behalf of a corresponding Commissioner for the purposes of a recognised law, must produce a certificate of authority. Clause 29 Subclause (1) amends section 92(1)(c) of the Taxation Administration Act 1997 to permit the disclosure of information obtained under or in relation to a taxation law to a recognised jurisdiction where it is for the purposes of administering a recognised law, including any legal proceedings. These provisions bring section 92(1)(c) into line with the language used in Division 2A, Part 9 of the Taxation Administration Act 1997. Subclause (2) inserts subparagraphs (vg), (vh) and (vha) into section 92(1)(e) of the Taxation Administration Act 1997. The new subparagraphs will permit a tax officer to disclose information obtained under or in relation to a taxation law to the Australian Crime Commission, the Australian Securities and Investments Commission and the Australian Taxation Office. 16

 


 

Disclosure to these organisations was previously allowed under section 7(1) of the Taxation Reciprocal Powers Act 1987. In particular, subparagraph (vg) permits disclosure to the Australian Crime Commission for the purposes of enabling it to perform its statutory functions under the Australian Crime Commission Act 2002 of the Commonwealth. The Australian Crime Commission is the principal Australian agency responsible for monitoring and assisting other Australian law enforcement agencies to investigate nationally significant crime. The amendment will allow a tax officer to disclose information obtained under the administration of Victoria's taxation laws, which may assist the Commission in its monitoring and investigation of criminal activity. Subparagraph (vh) permits disclosure to the Australian Securities and Investments Commission (ASIC) for the purpose of enabling it to perform its functions as Australia's corporate, markets and financial regulator. ASIC is responsible for maintaining the fairness and transparency of the Australian financial system and the entities within it, and promoting investor and consumer confidence with this system. These responsibilities include monitoring compliance with and prosecuting breaches of the Corporations Act 2001 of the Commonwealth. This amendment will allow a tax officer to disclose information obtained under the administration of Victoria's taxation laws which may assist ASIC in prosecuting serious corporate crime. Subparagraph (vha) permits the disclosure of information to the Australian Taxation Office (ATO) for the purpose of enabling it to perform its functions as the Commonwealth's principal revenue collection agency. The ATO is responsible for the administration of federal taxes, excises and superannuation, which includes the investigation and prosecution of serious tax evasion and fraud under the various federal taxation Acts including the Income Taxation Assessment Act 1936 of the Commonwealth and the Taxation Administration Act 1953 of the Commonwealth. This amendment will allow a tax officer to disclose information obtained under the administration of Victoria's taxation law which may assist the ATO in managing the Commonwealth revenue system and protecting the public revenue. These amendments are intended to facilitate certain disclosures previously allowed under section 7 of the Taxation (Reciprocal Powers) Act 1987. They are not intended to alter the scope of disclosures previously permitted under that provision. 17

 


 

Clause 30 inserts new definitions into section 3 of the Taxation Administration Act 1997. notification default is defined to mean-- a failure to lodge a notice under section 46K of the Land Tax Act 2005. Section 46K of the Land Tax Act 2005 requires a trustee to notify the Commissioner on the happening of certain events, including when a person becomes trustee of land in Victoria, or a trustee disposes land that is subject to trust; or a failure to notify the Commissioner of an error or omission in accordance with section 104A of the Land Tax Act 2005. Section 104A is inserted by clause 14 of this Bill. Clause 31 makes various amendments to section 29 of the Taxation Administration Act 1997. Subclause (1) omits the word "tax" from the heading to section 29 to indicate that the section applies to both tax defaults and notification defaults. Subclause (2) omits the words "in addition to the amount of tax unpaid" from section 29(1) so that the singular purpose of this section is to impose penalty tax where a tax default occurs. Subclause (3) inserts a new section 29(1A) which provides that a taxpayer will be liable to pay penalty tax where a notification default occurs. The effect of this amendment is to provide an effective deterrent and penalty for non-compliance with sections 46K and 104A of the Land Tax Act 2005. Subclause (4) amends section 29(4) to provide that penalty tax imposed under Division 2 of Part 5 of the Taxation Administration Act 1997 is payable in addition to interest and any amount of tax unpaid. Clause 32 makes various amendments to section 30(1) of the Taxation Administration Act 1997. Subclause (1) inserts a new section 30(1A), which provides the amount of penalty tax payable in respect of a notification default is 25% of the additional amount of tax that the taxpayer would have been assessed as liable to pay had the notification default not occurred. Accordingly, penalty tax is not payable where the taxpayer would have been assessed as liable to pay the same, or a lesser amount, of tax notwithstanding that a notification default has occurred. 18

 


 

Subclause (2) inserts a new section 30(2A) into the Taxation Administration Act 1997. The new section establishes the amount of penalty tax which is payable where a notification default is caused wholly or partly by the intentional disregard by the taxpayer (or a person acting on the taxpayer's behalf) of section 46K or 104A of the Land Tax Act 2005. Under section 30(2A) the amount of penalty tax payable is 75% of the additional amount of tax that the taxpayer would have been assessed as liable to pay had the notification default not occurred. Subclause (3) amends section 30(3) of the Taxation Administration Act 1997 to ensure that it applies to both tax defaults and notification defaults. Under section 30(3) of the Taxation Administration Act 1997 the Commissioner can determine that no penalty tax is payable if the taxpayer (or a person acting on the taxpayer's behalf) took reasonable care to comply with a taxation law, or the default occurred because of circumstances beyond their control. Clause 33 Subclause (1) amends section 31(1) of the Taxation Administration Act 1997 to ensure that it applies to both tax defaults and notification defaults. Section 31(1) of the Taxation Administration Act 1997 allows the Commissioner to reduce the amount of penalty tax by 80% where a taxpayer makes a voluntary disclosure to the Commissioner before an investigation commences. Subclause (2) amends section 31(2) of the Taxation Administration Act 1997 to ensure that it applies to both tax defaults and notification defaults. Section 31(2) of the Taxation Administration Act 1997 allows the Commissioner to reduce the amount of penalty tax by 20% where a taxpayer makes a voluntary disclosure to the Commissioner after an investigation commences. Clause 34 Subclause (1) amends section 32(1) of the Taxation Administration Act 1997 to ensure that it applies to both tax defaults and notification defaults. Section 32(1) of the Taxation Administration Act 1997 allows the Commissioner to increase the amount of penalty tax by 20% if, after an investigation commences, the taxpayer takes steps to hinder the Commissioner from becoming aware of the nature and extent of the default. Clause 35 amends Schedule 1 of the Taxation Administration Act 1997 to insert item 17, which provides transitional rules for the application of penalty tax to notification defaults under Division 2 of Part 5 of the Taxation Administration Act 1997. 19

 


 

Subclause (1) provides the transitional rule for a trust notification default under section 46K of the Land Tax Act 2005. Under that rule, penalty tax cannot be applied for a trust notification default if the event that triggers the notification requirement in section 46K occurs before 1 January 2010. For example, a taxpayer acquires land as trustee on 1 July 2008, but fails to notify the Commissioner of the acquisition in accordance with section 46K of the Land Tax Act 2005. The Commissioner becomes aware of the trust notification default on 1 January 2010 and assesses the trustee for land tax as a trustee for the 2009 and 2010 tax years. The Commissioner cannot apply penalty tax because the trust notification default occurred before 1 January 2010. Subclause (2) provides the transitional rule for an error notification default under section 104A of the Land Tax Act 2005. Under that rule, penalty tax cannot be applied for an error notification requirement that relates to an assessment issued before 1 January 2010. For example, a taxpayer is issued with a land tax assessment on the 1 December 2009. The assessment incorrectly specifies that a parcel of land held by the taxpayer is exempt from land tax. The taxpayer fails to inform the Commissioner of the error in the assessment within 60 days resulting in a notification default under section 104A. Even though the "notification default" occurs after 1 January 2010, the Commissioner cannot impose penalty tax because the assessment was issued before 1 January 2010. Subclause (3) inserts a definition for the terms error notification default and trust notification default which are used in this clause. Error notification default is defined to mean a failure to notify the Commissioner of an error or omission in accordance with section 104A of the Land Tax Act 2005. Trust notification default is defined to mean a failure to lodge a notice under section 46K of the Land Tax Act 2005. Clause 36 amends section 92(1)(b) of the Taxation Administration Act 1997. Subsection 92(1)(b) now permits the disclosure of information not only where it is connected with the administration of a taxation law, but also for the purposes of administering the Unclaimed Money Act 2008 and the First Home Owner Grant Act 2000. Information disclosed under this provision may also be used for the purposes of any legal proceedings arising out of any of these laws. This clarifies the relationship between the taxation laws and these Acts which are also administered by the Commissioner of State Revenue. 20

 


 

This clause also amends section 92(1)(e)(iii) and clarifies that the Victorian Archives Authority is the Public Records Authority Victoria. Clause 37 inserts a new section 125(1A) into Part 11 of the Taxation Administration Act 1997. The new section provides that the Commissioner may serve court processes in tax recovery matters by post. The effect of the amendment is to remove any doubt that section 125 of the Taxation Administration Act 1997 preserves the ability to serve court process by post that existed under the Stamps Act 1958, Payroll Tax Act 1971, and the Land Tax Act 1958. PART 6--REPEAL AND CONSEQUENTIAL AMENDMENTS Part 6 provides for the repeal of the Taxation (Reciprocal Powers) Act 1987 and the consequential amendments arising from the repeal of that Act. These amendments repeal redundant references to the Taxation (Reciprocal Powers) Act 1987 and corresponding law as defined by the Taxation (Reciprocal Powers) Act 1987, and replace the reference to reciprocal taxation law with the new terms being introduced by this Bill. Clause 38 repeals the Taxation (Reciprocal Powers) Act 1987. Clause 39 repeals section 244 of the Accident Compensation Act 1985. Rather than amending section 244 to remove a reference to the Taxation Reciprocal Powers Act 1987, the section is repealed because section 244 applies in relation to Part 7 of the Accident Compensation Act 1995 which was repealed by the Accident Compensation (Amendment) Act 1994. Clause 40 repeals section 2 of the Business Franchise (Tobacco) Act 1974. Clause 41 replaces section 77(1)(c) and 77(2) of the Unclaimed Money Act 2008, in light of the amendment to section 92(1)(c) of the Taxation Administration Act 1997, and the introduction of the terms recognised jurisdiction and recognised law by this Bill. PART 7--REPEAL OF AMENDING ACT Clause 42 provides for the automatic repeal of this Act on 1 October 2011. The repeal of this Act does not affect in any way the operation of the amendments and repeal made by the Act (see section 15(1) of the Interpretation of Legislation Act 1984). 21

 


 

 


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