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TaxTalk – Electronic Bulletin of Australian Tax Developments State taxes New duty legislation in Western Australia (WA) Proposed legislation was introduced into the Western Australian Parliament on 28 November 2007 to replace the Stamp Act 1921 (WA). If passed by Parliament, the proposed commencement date of the new legislation is 1 July 2008. This proposed legislation represents substantial changes to the existing stamp duty law in WA. These substantial changes include measures to: • Introduce a new landholder regime that imposes duty on relevant acquisitions of interests in companies and unit trusts that directly or indirectly own interests in land in WA valued at $2 million or more. This measure will replace the existing landrich regime. Broadly, under the existing landrich regime, relevant acquisitions of interests in companies that directly or indirectly own Western Australian land valued at $1 million or more and where the value of all direct or indirect interests in land represent 60% or more of the value of all property to which the company is directly or indirectly entitled (excluding certain asset categories) are subject to duty. This measure represents a broadening of the tax base notwithstanding the increase in the land value threshold from $1 million to $2 million. • Extend the availability of exemptions from stamp duty for intra-group transfers of property. Currently, existing corporate reconstruction exemptions require the parties to be associated for 3 years before the transfer and to remain associated for a 5 year period after the transfer, and exemption is not available if one of the entities is a trust. Under the new provisions, the pre-transfer association requirement will be abolished, the post-transfer association requirement will be relaxed and the exemption will be extended to allow transfers to and from unit trusts. • Provide that duty is not payable on acquisitions of units in a private unit trust scheme unless the trust is a landholder (as described above) and 50% or more of the units (in total) are acquired. Currently, the acquisition of any units in a private unit trust scheme that owns property in WA can be subject to duty. • Reduce stamp duty rates by approximately 5%, with the maximum rate of duty applying to a transfer of property being reduced to 5.15%. The maximum rate is currently 5.4%. • Introduce a general anti-avoidance provision to apply to transactions that are blatant, artificial or contrived for the sole or dominant purpose of eliminating, reducing or postponing a liability to duty. Currently, a general anti-avoidance provision does not exist. Australian Capital Territory (ACT) duty amendments The ACT Duties Act 1999 has been amended with effect from 5 December 2007 in respect of long-term leases which are dutiable, and also in respect of transitional provisions for other leases where duty is abolished from 1 July 2009. The amendments include the following: • the definition and commencement of a long-term lease has been clarified and ensures that, where either a new lease granted on surrender of another lease to the same or associated person, or an extension of an existing lease, result in a term greater than 30 years, it is to be treated as if it were a longterm lease • there is clarification that an option to renew a lease granted before 1 July 2009 may be included in the duty base if the option is executed after 30 June 2009, where the main purpose is to defer execution of the instrument to avoid lease duty, and • where a lease has been granted on surrender of another lease, and the lease results in a longterm lease, the duty that is payable at conveyance rates is to be reduced by the amount of any duty already paid under the original lease. The same position will also apply where the term of a lease is extended, or further extended. ACT payroll tax changes On 6 December 2007, changes to the ACT’s payroll tax laws were introduced into Parliament. In introducing the changes, the Chief Minister stated that the “changes will make administration more consistent and reduce red tape and compliance costs for businesses across State and Territory borders. The changes are a result of an agreement in March by all State and Territory Treasurers to overhaul payroll page
TaxTalk – Electronic Bulletin of Australian Tax Developments tax arrangements. It was agreed that the States and Territories would focus on simplifying and harmonising payroll tax provisions, while retaining control over rates of tax and tax‐free thresholds”. According to the Chief Minister, the new Bill will implement the remaining agreed items and amend the existing payroll tax legislation to: • adopt an exemption to payroll tax for wages paid in the ACT for employees who work in another country for a continuous period of six months or more • adopt exemption rates for motor vehicle allowances and accommodation allowances linked with those set annually by the Australian Taxation Office for income deduction purposes • adopt a single ‘gross up’ factor for the purpose of calculating the amount to be taken as wages for payroll tax purposes of benefits that attract a fringe benefits tax (FBT) liability, and • adopt the New South Wales and Victorian payroll tax grouping provisions. There are also a number of transitional provisions and consequential amendments to other existing pieces of legislation. The changes are expected to take effect from 1 July 2008. Queensland (Qld) payroll tax relief for emergency services The Qld Treasurer has announced that employers whose workers are deployed as emergency services volunteers will be exempt from paying payroll tax for the hours they spend away from their jobs in the field. The Treasurer said the exemption would apply for employers if staff are involved in bushfire fighting activities as a volunteer or in emergency activities as a volunteer emergency worker. The exemption will not apply to wages for recreation leave, annual leave, long service leave or sick leave. It is proposed that the exemption will take effect from 1 July 2008. For further information please contact your usual PricewaterhouseCoopers adviser, or: Barry Diamond, Partner PricewaterhouseCoopers Tax Stamp Duty Phone: +61 3 8603 1118 barry.diamond@au.pwc.com Angela Melick, Partner PricewaterhouseCoopers Tax Stamp Duty Phone: +61 2 8266 7234 angela.melick@au.pwc.com Personal and expatriate taxes Legal costs were related to employment The Full Federal Court in Federal Commissioner of Taxation v Day [2007] FCAFC 193 has held that legal expenses incurred by a Customs officer were tax deductible. The costs were incurred by the taxpayer in defending charges brought against the officer under the Public Service Act 1922 (Cth). The taxpayer, a senior officer with the Australian Customs Service (ACS) was charged on three separate occasions for various alleged breaches of the relevant statute, namely for breaching the standards of conduct for ACS officers (“the first charge”), for failing to accurately record attendance in connection with his employment (“the second charge”) and for failing to fulfil his duties as an officer of the ACS (“the third charge”). In respect of the first charge, the taxpayer had been demoted, but as a result of legal action, this demotion was overturned. The taxpayer incurred legal costs in instigating this legal action. In respect of the second charge, the taxpayer was initially required to pay an amount to the ACS, but this position was amended on an appeal to the relevant Disciplinary Committee, which ordered that the taxpayer be transferred to another position and paid accordingly. This, in effect, was a demotion. The taxpayer incurred legal costs in respect of advice regarding the appeal. In respect of the third charge, the taxpayer took legal action seeking orders from the Court including orders that the charges be set aside. The taxpayer was unsuccessful in this regard and incurred substantial legal costs. At first instance, the Federal Court held that only the legal fees incurred in respect of the second charge were tax deductible, and the deductibility of these fees was not required to be reconsidered by the Full Court. The issue before the Full Court was whether the fees relating to the first and third charges were deductible under the general deduction provision of the tax law, and specifically, whether the amounts were incurred in gaining or producing assessable income. In a majority decision (Justice Dowsett dissenting), the Full Court held that the fees were tax deductible. In the view of Justice Edmonds, it was the taxpayer’s employment which was “the occasion of the expenditure and the taxpayer’s performance and observance of the duties of page
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