Page 611 - Week 02 - Thursday, 20 March 2014
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Title read by Clerk.
MR BARR (Molonglo—Deputy Chief Minister, Treasurer, Minister for Economic Development, Minister for Sport and Recreation, Minister for Tourism and Events and Minister for Community Services) (11.34): I move:
That this bill be agreed to in principle.
The Duties (Commercial Leases) Amendment Bill 2014 brings forward important changes to duty legislation which will have a positive impact on longstanding businesses in the territory. The amendments introduce a simpler and more effective anti-avoidance provision in relation to commercial leasing arrangements.
The bill I present to the Assembly today will repeal the provisions in the Duties Act 1999 that impose conveyance duty on commercial leasing arrangements merely due to having a term of 30 years or greater. The current lease provisions are intended as an anti-avoidance measure, levying duty on long-term commercial leasing arrangements that could be a de facto transfer of commercial property. From recent representations to the ACT Revenue Office and me, it has now become evident that a number of long-term commercial leasing arrangements may become liable for duty under these provisions, despite no intent of property transfer or avoiding conveyance duty.
The territory’s existing approach to lease duty is unique, in that it imposes conveyance duty on commercial leasing arrangements based simply on the duration of the lease. All other jurisdictions apply duty based on a premium associated with commercial leasing arrangements or any amount other than rent reserve paid for the lease.
These amendments will align the territory with other jurisdictions by imposing duty on the premium component that is paid on the grant or transfer of a commercial lease. A substantial premium paid above the market rent on the grant or transfer of a commercial lease is one primary characteristic of an underlying transfer of the land.
A premium paid above market rent will not incur duty until a determined threshold is exceeded. However, once the threshold is exceeded the entire premium component will become liable for duty. In this way, the appropriate duty is paid for the de facto transfer of commercial property.
The determined threshold will ensure that small premiums paid do not become dutiable where there are factors such as restrictive market forces or where demand exceeds supply. The premium threshold will be set via a disallowable instrument. This allows for simple adjustment in reaction to market trends and to ensure this threshold only captures as dutiable its intended target.
This bill has been developed through extensive consultation with key industry stakeholders, and this has resulted in provisions that are simple and minimise any administrative burdens to all parties involved. This bill will remove an inequitable tax from the Duties Act and replace it with provisions that further contribute to the
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