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Wednesday, 4 December 1985
Page: 2876


Senator REID(10.59) —There are a number of Bills in this tax package, but I wish specifically to address my remarks to the Australian Capital Territory Stamp Duty Amendment Bill 1985 and that part of the Taxation Laws Amendment Bill (No. 3) 1985 which relates to changes to legislation in the Australian Capital Territory. It is necessary for me to go back to the second reading speech of the Minister for Finance (Senator Walsh) who, when referring to these Bills, said:

These measures are part of the wider proposal to better align ACT taxes with those levied by the States.

These measures would be a little more convincing if there were some better reason for raising taxes in the Australian Capital Territory than merely to bring them into line with those levied by the States. The Minister could perhaps have dealt with this matter somewhat differently, rather than merely treating us in this manner.

It is worth looking into the implications of Australian Capital Territory taxes being aligned with taxes in the States, because there is no clear statement from the Government as to which States or which taxes have been considered. There are not uniform taxes throughout the States and one wonders for how long any taxes introduced into any State will appear in the Australian Capital Territory, presumably for no better reason than that the State wanted them introduced here. It is necessary to look at what has gone on. These measures seem to be a bit selective. If it is a revenue raising measure it probably comes into effect; if it is some form of concession it seems to have been left out. It is to some of those concessions that have been left out that I specifically wish to turn this morning.

I refer to the question of payroll tax. For a long time Australian Capital Territory firms have had levied upon them payroll tax in line with the New South Wales rate, but we are always months behind. This means that although there is an annual adjustment, firms in the Australian Capital Territory have been disadvantaged by being unable to use the money they have had to pay out while waiting to be brought into line with New South Wales. This may not amount to very much; it may well be that some people just do not see the point in this at all. But the adjustment is made long after the payments. The Pay-roll Tax (Territories) Assessment Amendment Bill 1982 enabled future increases in the level for exemption from payroll tax to be prescribed by regulation. Even so there were considerable delays before the effect took place. On 22 November 1985 an increase in the level of exemption was announced, to come into effect from 1 July 1986. This is a new trend in payroll tax; even so the necessary regulation needs to be in effect and hopefully that will take place long before that date and not months later. Looking back to this year, 1985, we see that the New South Wales change occurred on 1 January 1985, but while the change in the Australian Capital Territory in fact took place from 1 January it was not gazetted until 31 July 1985. Many Australian Capital Territory firms had to pay the higher rate of payroll tax during that time. As I said, it tends to work one way. If it is revenue raising it happens pretty smartly; otherwise it may well be delayed.

It is in the area of the master builders apprenticeship scheme and payroll tax that we seem to be most disadvantaged. There is no exemption from the payment of payroll tax in the Australian Capital Territory scheme even though the other State schemes, except for those in Western Australia and Tasmania, exempt the payment of payroll tax. On 15 February 1984 the Minister for Territories and Local Government, in a letter to the Master Builders Association, conceded that there was a very strong case for a rebate of payroll tax on the master builders apprenticeship scheme. The scheme operates to get young people experience in the building trade so that we will have tradesmen for the future. At present 84 apprentices are managed by the master builders at a cost of $1.2m. There could be two, if not four, more apprentices in this exemption which applies in most other States applied in the Australian Capital Territory. The Government says that it is committed to training for young people. We have had the much-heralded and expensive launch of Priority One: Young Australia, but this scheme is operating and it works, and with a little effort it could be made more effective. It could benefit from this exemption to which I have referred. The fact is that if many of these apprentices had been with small building firms payroll tax would not have been paid at all, but because they are in one large scheme payroll tax is levied, and we do not seem to be able to persuade the Government that there should be an exemption. The Master Builders Association is filling a gap; it is producing very competent young apprentices and the scheme is being eroded because it does not have this concession.

To return to the two specific Bills, I point out that there are some areas in which we need to ask the Government to consider changes which would bring us more into line with the New South Wales legislation which this legislation mirrors. There is a suggestion that needs to be addressed-that this legislation is retrospective. At the Committee stage I will move amendments in relation to this to each of the two Bills. I have had a number of submissions, in particular one from the Law Council of Australia, which says in paragraph 6:

The Law Council is opposed to the imposition of taxation on a retrospective basis.

I do not wish to go in detail through all the clauses that are affected, but I seek leave to incorporate the Law Council's submission from paragraph 5 to the end. The submission sets out the details of the clauses which are affected.

Leave granted.

The submission read as follows-

5. The remainder of this Submission sets out a number of areas in which the Law Council regards the proposed legislation as being deficient. We have not raised minor or mere drafting points but only points which seem to us to be, though technical, of importance. We would urge the Government to ensure that the proposed legislation is amended to overcome these deficiencies prior to it being passed.

6. The Law Council is opposed to the imposition of taxation on a retrospective basis. There are sufficient indications from the proposed legislation to suggest that the Government is not intending for it to have a retrospective operation: see particularly section 8 of the Australian Capital Territory Stamp Duty Amendment Bill 1985 which provides that sections 3, 6 and 7 of that Bill (which sections include the levying of the loan securities duty) ``apply to instruments executed on or after the date of commencement of this section''. However, there are a number of areas where we consider that the proposed legislation could have a retrospective operation and we would submit that these deficiencies should be rectified:

(a) Section 8 of the Australian Capital Territory Stamp Duty Amendment Bill, quoted above, should be amended to state positively that the amendments referred to shall not apply to instruments executed on, or transactions or matters or things occurring, prior to the date of commencement of that section.

(b) The proposed section 58M of the Australian Capital Territory Taxation (Administration) Act (``the Administration Act'') allows duty to be imposed in respect of events occurring after the date of execution of a particular loan security, where, for example, further advances are made pursuant to that security, or where the total amount secured by a security is increased whether or not pursuant to that loan security.

While proposed section 58M (1) (c), covering only one of these situations, specifically provides that duty can only be imposed where the original loan security was executed on or after the date when the provisions come into operation, other parts of s58M do not so specify, in particular s58M (1) (b) and s58M (4) and (5).

Thus, for example, it is possible to read s58M (5) as imposing duty in respect of advances made pursuant to a security executed prior to the date of commencement of the provision.

We suggest that amendments be made to these parts of s58M expressly to state that the provisions only operate where the original loan security was executed on or after the date of commencement of this section, in the way provided for in s58M (1) (c).

(c) A number of the proposed provisions require instruments to be lodged with the Commissioner for assessment within, for example, 30 days after the instrument has been executed: see proposed ss58K (a), 58M (1) (a), (3) (b), (4) (b), (5) (d), 58P (2) (b), 58Q (2) (b). These provisions should be amended to ensure that lodgment is not required in respect of an instrument which is executed prior to the commencement of the provisions, so that, for example, an instrument executed within the 30 day period prior to the commencement of the provisions should not be one in respect of which lodgment is required after the provisions commence.

7. The proposed section 58P of the Administration Act imposes duty on a collateral security ``unless the primary loan security or any other collateral security for the same money as is secured by the primary loan security has been duly stamped''. By section 3 (b) of the Australian Capital Territory Stamp Duty Amendment Bill 1985, stamp duty is then imposed on that collateral security.

Therefore, a collateral security which is executed after the commencement of the amendments and which is collateral to a primary loan security which was executed prior to that commencing date (and hence which cannot be said to be ``duly stamped'') will be liable for ad valorem duty, even though the clear intention of section 58P (1) is that a collateral security should not be so liable to duty.

The essence of the collateral securities exemption is that, because a collateral security does not increase the moneys already secured (since it must be a security for the same money as is already secured by the primary loan security), it should not be liable for loan security duty; loan security duty is imposed as a result of moneys becoming secured.

We therefore submit that section 58P should be amended so that such a collateral security is not dutiable, by excluding from the liability for duty a collateral security where the primary loan security is exempt from duty or is not liable for duty.

8. Proposed section 58R of the Administration Act allows a body corporate to elect to pay duty by a monthly return procedure in the case of a corporate debenture issue. The provision requires details to be set out, and duty paid, in respect of the debentures issued during the preceding month which ``are connected with the Territory''. This phrase covers a loan security where it is executed in the Territory by the Borrower or where the whole or part of the property secured by the loan security is situated in the Territory; proposed s4 (11) of the Administration Act.

We do not consider that this is an effective territorial connection for the purposes of the undertaking procedure, since once a corporate debenture issue is secured over property which includes property located in the Territory, it would seem that all debentures issued during the course of the issue would be required to be stamped.

Further, it would appear that no credit would be available to the extent to which duty has been paid elsewhere in Australia under s58T, because that provision is limited to a situation where duty is payable on a ``loan security'', and under the procedure in s58R the dutiable document is the instrument brought into existence at the end of each month, which would not usually be a loan security. In this regard, s58R(3) does not go so far as deeming the instrument to be a loan security, but rather simply states that the duty payable is the same duty that would have been payable had the instrument been a loan security. The credit provisions of s58T do not appear to apply to that instrument.

We therefore submit that the proposed s58R should be amended so that it operates in the same way as the equivalent undertaking procedures in New South Wales (s84D of the NSW Stamp Duties Act 1920) and Victoria (s137M of the Victorian Stamps Act 1958), namely, duty should only be payable in respect of those debentures which were during the preceding month ``subscribed for in'' the Territory.

At the very least, even if this amendment is not made, the monthly instrument required to be lodged under s58R (2) should be deemed to be a loan security, so that s58T can apply to it. We note in this regard that, as presently drafted, since that instrument would not usually be a loan security, the phrase in s58R, ``connected with the Territory'', would not necessarily have the meaning ascribed to it in s4 (11), since that latter provision relates only to ``a loan security''.


Senator REID —Thank you, Mr Acting Deputy President. The submission would not make exciting listening, but it is necessary to the substance of the debate to have that information before us. There is no suggestion by any person that the Government intended this legislation to act retrospectively. It may well be that if this matter ever finished up in the High Court of Australia it would be ruled retrospective, but I do not think that it was the Government's intention to let things get to that stage or to that expense. The amendments that we propose to this legislation would ensure that it would not act retrospectively and for that reason we will move them at the Committee stage.

There are other anomalies which need to be addressed. In New South Wales if one proceeds to consolidate a number of titles on which there have been mortgages there is provision for the mortgages to carry forward, in a sense, and not acquire duty for a second time. If one has three titles and one abandons them so that they may then be consolidated into one title, one then has a new mortgage which covers the mortgages that previously existed. Under the Australian Capital Territory legislation if one wishes to consolidate leases or make a change of purpose clause one would need to surrender the lease, discharge the mortgage and get a new title with the consolidated lease or the change of purpose clause, and one would then have a new mortgage. One would have paid duty on the mortgage the first time and, the way in which this legislation is drafted, it seems that one would have to pay duty again the second time. I believe that can be corrected, perhaps by an amendment to the Real Property Ordinance. It needs to be done and I would like an undertaking from the Government that it will attend to this and adopt that course of action as a concession. It applies in New South Wales and there is no reason why it should not apply in the Australian Capital Territory.

There is a provision in New South Wales whereby a first home owner can get deferral of payment of stamp duty over a period of five years. There is no suggestion that that provision is actually in the Stamp Duties Act, but in fact it is an administrative arrangement which applies in New South Wales and is of benefit to first home buyers. Under the same principle which the Minister for Finance used to bring in this revenue raising legislation, he might also introduce this deferral into the Australian Capital Territory to give that benefit to citizens of this Territory who are also having great problems purchasing and maintaining homes at present. The very high interest rates which operate at present are having an effect on many people's ability to maintain their mortgages. This point was conceded only the other day in this chamber when the Minister for Education (Senator Ryan) commented on the number of constituents she was seeing who have this problem. These same people, of course, are somewhat bemused by the legislation that we have before us at present, which is all revenue-raising. Many of these people thought that the announcement in the tax package that there were to be tax concessions really meant something and that they would be better off with tax reductions. But if these tax concessions come at all it will not be for a very long time. With the disappoinment of that announcement and the ever increasing interest rates I am now in a position where I am seeing-as I have been-people who are running into difficulties with their mortgage repayments.

It is worth looking at just one letter which I have which sets out the plight of a number of people in the Australian Capital Territory. I will not use the constituent's name as it is not relevant but, of course, I have it. The letter states:

Dear Senator Reid

I am writing to you to seek your assistance in a matter of house loan repayments.

In December 1984 I purchased a home for myself and my two dependent children. The purchase price of the house was $85,000.00 of which I contributed approximately 50% and borrowed the balance from Canberra Permanent Building Society over a 25 year loan period.

During the ensuing 12 months the interest rate on this loan has risen four (4) times . . .

I noticed an announcement in the Canberra Times this morning that the Canberra Permanent Building Society expects to have to raise interest rates and mortgage repayments again in about three months which, of course, will exacerbate the problem I am referring to. I return to the letter which continues:

. . . increasing my repayments from $479 per month to $529 per month (an increase of 10.5%) and an overall interest rate hike of 2%. I was distressed to hear yesterday that a further interest rate increase was imminent.

This letter was written some several days ago. The letter continues:

This will increase my house repayments to approximately $546 per month, an increase in 13 months of $67 a month or $804 per annum.

The new repayment figure of $546 per month now represents over 40 per cent of my nett income, a situation which I find very difficult to cope with along with other cost increases such as electricity, rates, food etc.

I am a single parent with two teenage children (ages 15 and 13 years). On a single income and with the rapid increase in interest rates I am finding that day to day living has now become a matter of mere survival from pay day to pay day.

The letter goes on:

I would appreciate it if you could advise me on the following:

and these are the points which the Government must address and must answer-

(1) Is there any course of action I can pursue to try to alleviate this escalating interest problem.

Perhaps the Treasurer (Mr Keating) can tell us when interest rates will come down. The letter continues:

(2) Is there any help available for a person in my position.

Is there any help available for those persons who are attempting to support their families, provide accommodation and do the sorts of things that any family wants to do for their children? I repeat that the letter states:

(2) Is there any help available for a person in my position.

The tragedy, of course, is that this constituent has to seek help. She is a woman in employment, buying a house and looking after her children, but she needs to say these things. The third question is:

(3) How much longer will this interest rate increase continue.

This constituent is not the only constituent who is asking that question but, as yet, we do not have answers. As Senator Messner has said, people all over Australia attempting to purchase their own homes are saying: `How much longer will this go on? How much longer will I be able to keep my house?' This constituent states that, if she has to sell her house, or if she is forced out of it and she has to seek government accommodation, it will be a tragedy for her, it will be an additional cost for the Government and it will not solve anything. I seek leave to incorporate in Hansard this letter that I have received because this constituent goes on to deal with a number of other matters which are relevant.

Leave granted.

The letter read as follows-

27 November 1985

Senator M. Reid

47 Mort Street

BRADDON ACT 2600

Dear Senator Reid

I am writing to you to seek your assistance in a matter of house loan repayments.

In December 1984 I purchased a home for myself and my two dependant children. The purchase price of the house was $85,000-00, of which I contributed approximately 50% and borrowed the balance from Canberra Permanent Building Society over a 25 year loan period.

During the ensuing 12 months the interest rate on this loan has risen four (4) times, increasing my repayments from $479 per month to $529 per month (an increase of 10.5%) and an overall interest rate hike of 2%. I was distressed to hear yesterday that a further interest rate increase was imminent. This will increase my house repayments to approximately $546 per month, and increase in 13 months of $67 per month or $804 per annum.

The new repayment figure of $546 per month now represents over 40% of my nett income, a situation which I find very difficult to cope with along with other cost increases such as electricity, rates, food etc.

I am a single parent with two teenage children (ages 15 and 13 years) on a single income and with the rapid increase in interest rates I am finding that day to day living has now become a matter of mere survival from pay day to pay day.

I would appreciate it if you could advise me on the following:

(1) Is there any course of action I can pursue to try alleviate this escalating interest problem.

(2) Is there any help available for a person in my position.

(3) How much longer will this interest rate increase continue.

I feel that if these increases become a monthly or two monthly occurence as they have been over the last few months I will be forced to sell my home and then become a burden on the Government as I will not be able to buy another home and will have great difficulty in obtaining rental accomodation, which as you know is at a premium in Canberra and probably more costly than loan repayments.

I have worked for the past 12 years to support myself and my two children and now find that, although I have provided them with a roof over their heads, I am finding it increasingly difficult to provide the other essentials of life such as clothing, food and education.

My daughter is in Year 9 at a Government school and wishes to progress to university. My son, due to physical disabilities attends a private school with special education facilities at a cost of some $750 per year which will increase as he rises through the secondary grades. These factors, along with the house repayment increases is making our lives exceptionally difficult.

As my elected representative in the upper house, I would appreciate it if you could bring this problem being suffered, not only by myself but by many many others in the community, before Government and take some steps to put a stop to this situation of rapidly increasing interest rates that is now and will continue to cause such hardship within the community.

I would appreciate any assistance you can offer.

Yours faithfully


The ACTING DEPUTY PRESIDENT (Senator Jessop) —Senator Reid, do you want the name of the person who wrote the letter to be included?


Senator REID —The name has not been included on the copy which I have submitted. I certainly have the name and have spoken to the woman in question. There is no need for her personal affairs to be displayed in that way. In summary, the Bills provide specifically for revenue raising in the Australian Capital Territory. I have referred to those areas where I believe the Bills do not deal with the Australian Capital Territory fairly as compared with New South Wales. I ask the Government to undertake to make those concessions which I have sought. I specifically urge the Government to accept the amendments which put the question of retrospectivity beyond any doubt and to examine most closely the submission from the Law Council which I have incorporated. I certainly urge the Government to look at the question of the master builders apenticeship payroll tax scheme to which I have also referred.

Debate interrupted.