The South Australian Budget for the 2015-16 financial year was delivered on 18 June 2015. Major tax cuts were announced for business, including a commitment to essentially abolish all stamp duties on assets other than residential property. These cuts are in response to its State Tax Review.
Stamp duty is often seen as a handbrake on business, and these changes are a bold and innovative step to attract more business to the State and get the economy running. This leadership at a State level will be welcomed by business, and represents a positive step towards broader tax reform.
Unlike many other States, South Australia finds itself with an operating surplus, thanks largely to a growing share of GST revenues under the current arrangement with the Federal Government. Other States no doubt envy this position. The leadership challenge for the other States would be to follow suit notwithstanding their declining share of GST revenues.
- A net operating surplus of $43 million in 2015-16 (surplus expected to continue over forward estimates).
- Key focus areas are tax reform, tax relief for households, stimulating the economy, building key infrastructure, supporting the North and other community measures.
- Tax reforms are expected to provide almost $670 million in tax reductions over the four years to 2018-19, including ongoing reductions of over $268 million each year from 2018-19.
- The introduction of the State Tax Review initiative provides $1.7 million in 2014–15 and $0.52 million in 2015–16 for costs associated with comprehensive review of the state’s taxation system and the implementation of reform measures being introduced by the government.
- South Australia’s GST revenue grants are anticipated to grow by 10.7 per cent, 10.1 per cent, 6.3 per cent and 2.9 per cent respectively over the forward estimates.
- A phased removal of stamp duties on all assets other than residential property, including an immediate abolition of share transfer duty, and duty on non-real property transfers
1. Stamp Duty / Land Tax
A number of key stamp duty changes were announced in the 2015-16 SA Budget, taking effect over time.
From 18 June 2015
- Abolition of stamp duty on non-real property transfers (i.e. property that is not land and buildings such as moveable plant and equipment, goodwill, business assets, etc).
- Abolition of stamp duty on non-quoted marketable securities (i.e. abolition of share transfer duty).
- Expansion of the availability of corporate reconstruction relief by:
- Removing the requirement for substantially all assets to transfer in the reconstruction;
- Adopting a corporate group definition that is more consistent with that used by other jurisdictions; and
- Removing the three year pre and post association tests.
- Expansion of the stamp duty concession for exploration tenements to include retention tenements (i.e. eligible transfers are only required to pay stamp duty of up to $1,000 rather than the duty rates that would normally apply).
- Introduction of a stamp duty and land tax exemption for a principal place of residence transferred into a Special Disability Trust for no consideration.
- Removal of the exemption available in relation to the partition of property between members of a family group (to prevent the avoidance of stamp duty in these instances).
From 1 July 2015
- Various land tax amendments (with effect from 30 June 2015), including:
- Introduction of a land tax principal place of residence exemption for property transferred into a Special Disability Trust.
- Extend the exemption/waiver from land tax where a person owns more than one principal place of residence on 30 June and to remove the requirement that applications for a refund be lodged before 30 September;
- Tighten the minor interest provisions in relation to how they apply to trusts to prevent land tax avoidance and ensure the aggregation principle applies more equitably; and
- Allow penalty tax on assessments of land tax where a taxpayer had been receiving an exemption due to providing RevenueSA with false or misleading information.
From the date of assent
- Clarify that the relevant date for determining the value of a property being transferred for stamp duty purposes is the date of transfer and not the date of contract.
- Expand the stamp duty exemption for interfamilial farm transfers, in particular in relation to transfers involving the use of certain types of trusts (consistent with RevenueSA’s long standing assessing process).
- Legislate ex gratia relief for incapacitated persons (from stamp duty on motor vehicles).
- Legislate ex gratia relief for disability service providers (from stamp duty on motor vehicles).
- Legislate ex gratia relief for charitable and religious purposes (i.e. where property is purchased wholly or mainly for an organisation’s charitable or religious purposes).
- Extend the definition of family group to include domestic partners (current definition does not include de facto couples or domestic partners, restricting access to certain exemptions).
From 1 July 2016
- One third reduction of conveyance duty on non-residential, non-primary production real property transfers (with a further third from 1 July 2017 and abolishment from 1 July 2018 as below).
From 1 July 2017
- Further one third reduction of conveyance duty on non-residential, non-primary production real property transfers.
From 1 July 2018
- Abolition of conveyance duty on non-residential, non-primary production real property transfers (including mining exploration licences and mining tenements).
- Abolition of stamp duty on transfer of units in a unit trust.
- Removal of the $1 million landholder threshold (This change coincides with the abolition of stamp duty on non-residential real property transfers and stamp duty will therefore only apply where control of an entity holding South Australian residential or primary production land asset changes).
2. Payroll Tax
- Extension of the small business payroll tax rebate from 1 July 2016 (the rebate provides a payroll tax savings for employers with taxable payrolls less than or equal to $1.2 million, with eligible criteria remaining unchanged).
3. Other measures
- Abolition of the Hindmarsh Island Bridge Levy and the Save the River Murray from 1 July 2015.
- Application of the Natural Resources Management water levy to co-produced water extracted by the gas and petroleum industry in the Far North Prescribed Wells Area, from 1 July 2016.
- Retrospective date of sale amendments to take effect from the date of assent.
- Payment of tax on appeal to take effect from the date of assent.
4. Other insights
State Tax Review Initiative provides measures for (see above for details):
- Taxes to be abolished;
- Tax relief;
- Taxes to be considered as part of the National tax reform process; and
- Tax simplification measures.
Other direct initiatives in the 2015–16 State Budget include:
- $2 million to develop a Northern Food Park;
- $25 million to renew ageing social housing stock;
- more than $10 million over three years to upgrade schools and children’s centres across Northern Adelaide;
- $55 million to build a new road for the Gawler East housing development — which industry estimates will unlock an additional 3000 homes, $1 billion worth of investment, and create an additional 6000 residential construction jobs over the life of the project; and
- The Northern Economic Plan will deliver a vision, strategy and specific actions that support the industrial transformation of Northern Adelaide once the car manufacturing era comes to an end.
Over the next four years, a $10.8 billion program will fund projects in key areas including:
- $3.3 billion in health — including our The Royal Adelaide Hospital;
- $1.4 billion on road project;
- $353 million on public transport;
- $216 million on education facilities;
- $197 million on the Adelaide Festival Centre Precinct; and
- $1.7 billion on water infrastructure.
- $159.5 million at the Flinders Medical Centre for a new 55-bed rehabilitation centre, a new older persons mental health service and new multi-level car park;
- $32 million at Modbury Hospital to develop a new dedicated eye clinic, a new hydrotherapy pool and more than double rehabilitation beds;
- $20.4 million at the Queen Elizabeth Hospital to add an additional level to the Allied Health and Rehabilitation Building, a new hydrotherapy pool and on-ward gyms;
- $16.1 million for more ambulance vehicles and ambulance stations;
- $15.1 million for a new Post Traumatic Stress Centre of Excellence; and
- new investments in both the Southern and Northern suburbs with improvements to the Noarlunga and Lyell McEwin hospitals.
South Australia has made a very bold move. Their proposals represent a significant boost for business in the State. A shift away from stamp duties to more efficient taxes is seen as a key driver for our nation’s future prosperity, and we look forward to seeing whether other States will follow South Australia’s lead.