Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)General outline and financial impact
Background
This package of Bills represents the Governments legislative response to the decision of the High Court in
Allders International Pty Ltd v Commissioner of State Revenue (Victoria)
(1996)
186 CLR 630
. In its decision the High Court held invalid the imposition of stamp duty on a lease covering part of a Commonwealth place on the grounds that paragraph 52(i) of the Constitution gives the Commonwealth exclusive power to make laws with respect to Commonwealth places.
The implications of this case are that other State taxes may similarly be held invalid in relation to Commonwealth places. The Government has been advised that as well as stamp duty, payroll tax, financial institutions duty and debits taxes may also be at risk of invalidity. At the request of the States, this package of Bills will:
- •
- provide for mirroring of those four taxes, and of any other State taxes should they be endangered, in relation to Commonwealth places from 6 October 1997; and
- •
- protect those four State revenues collected before 6 October 1997 in respect of Commonwealth places. It will do this by applying a windfall tax on applications for refunds, sought on the basis of constitutional invalidity, of any of the four taxes which were paid prior to 6 October 1997.
Commonwealth Places (Mirror Taxes) Bill 1998
Provides for the imposition of taxes, in relation to Commonwealth places in a State, which mirror the stamp duties, payroll taxes, financial institutions duties and debits taxes of that State. The revenue collected will be returned to the States.
Date of effect: The Bill will apply from date of Royal Assent with effect while arrangements between the Governor-General and the Governor of the State for the exercise or performance of powers, duties or functions under the Bill are in place, requiring payment of amounts which would have become first due for payment on or after 6 October 1997 had the State tax laws been fully complied with before then and had they not been invalid.
Proposal announced: Announced by the Treasurer in a Press Release (No. 109) on 6 October 1997.
Financial impact: The measures will protect revenues which would have been collectable by the States from 6 October 1997. The amount of revenue which will be collected and returned to the States is not known.
Compliance cost impact: There will be increased compliance costs for those taxpayers who had never before paid these State taxes. There may also be increased administration costs for the States.
Commonwealth Places Windfall Tax (Collection) Bill 1998
Provides for the determination, collection, and administration of the Commonwealth places windfall tax which applies to claims for refunds of amounts paid under State taxing laws before 6 October 1997.
Date of effect: The Bill will apply from 6 October 1997.
Proposal announced: Announced by the Treasurer in a Press Release (No. 109) on 6 October 1997.
Financial impact: The measures will protect revenues already collected by the States before 6 October 1997. The revenue from the windfall tax depends upon the number of claims and is not known.
Compliance cost impact: The proposed windfall tax should not increase compliance costs. However, there may be increased administration costs for the States.
Commonwealth Places Windfall Tax (Imposition) Bill 1998
Imposes the Commonwealth places windfall tax at a rate of 100%.
Date of effect: The Bill will apply from 6 October 1997.
Proposal announced: Announced by the Treasurer in a Press Release (No. 109) on 6 October 1997.
Financial impact: The measures will protect revenues already collected by the States before 6 October 1997. The revenue from the windfall tax depends upon the number of claims and is not known.
Compliance cost impact: The proposed windfall tax should not increase compliance costs. However, there may be increased administration costs for the States.
Commonwealth Places (Consequential Amendments) Bill 1998
Makes consequential amendments to Income Tax Assessment Act 1936 , Income Tax Assessment Act 1997 and the Commonwealth Places (Application of Laws) Act 1970 (the 1970 Act). The amendments to the Income Tax Assessment Acts will exempt from income tax refunded State taxes subject to the windfall tax and deny an income tax deduction for the windfall tax. The amendment to the 1970 Act will ensure that the provisions of the State taxing laws which will be mirrored by the Commonwealth Places (Mirror Tax) Act 1998 will have effect under that Act rather than the 1970 Act.
Date of effect: The amendments will apply from the date of Royal Assent.
Proposal announced: Not previously announced.
Financial impact: No impact on the revenue.
Compliance cost impact: The amendments will have no effect on compliance costs.
RIS SUMMARY
Scale: Low impact
- •
- Only taxpayers operating in or in relation to a Commonwealth place within a State will be affected by the mirror tax and windfall tax legislation.
- •
- The Commonwealth and the States will work closely to ensure that the terms of their bilateral agreements relating to revenue collection minimise the compliance costs on taxpayers.