Against a backdrop of uncertain economic conditions, it is perhaps unsurprising that the 2013-14 budgets for each State and Territory adopted a uniformly conservative approach, with a number of increases in tax, and deferrals of previously planned tax cuts, announced.
The only significant revenue announcement by the Victorian government was that, from 1 January 2014, the congestion levy applied to each car park space in the central business district and inner Melbourne would be increased from $950 to $1,300 per car park. Furthermore, the scope of application of the congestion levy is to be broadened to incorporate short-stay car park spaces in addition to long-stay car park spaces. This measure is designed to reduce the number of cars in the CBD and encourage the use of public transport. However, the levy increase is also anticipated to raise revenue of approximately $44.2 million in 2013-14.
New South Wales
The New South Wales government confirmed that the abolition of stamp duty on business mortgages, non-quoted marketable securities and transfer duty on non-real business transfers (e.g. goodwill, intellectual property, statutory licences) will be deferred indefinitely. These duties had previously been scheduled for abolition on 1 July 2013. The duties have been retained in order to fund the $1.7 billion pledged by the NSW government under the National Education Reform Agreement (i.e. the Gonski reforms).
The NSW government has also announced that, from 1 July 2013, the payroll tax threshold will be increased from $689,000 to $750,000, but the annual indexation of the payroll tax threshold will cease. The increased threshold is anticipated to reduce revenue by $54 million in 2013-14. This incentive has been introduced to combat a challenging employment environment in NSW as the anticipated growth of employment for 2013-14 has dropped to 1.25% (down from a 1.5% rise in employment in 2012-13), while unemployment is expected to rise to 5.5% in 2013-14 (up from 5.2% unemployment in 2012-13).
The Queensland government announced that the planned increase in the payroll tax threshold from $1,100,000 to $1,200,000 would be deferred until 1 July 2015. The deferral is expected to save approximately $40 million in 2013-14.
Additionally, the rate of insurance duty applicable to insurance premiums for Class 1 (currently 7.5%) and Class 2 (currently 5%) general insurance products will be increased to 9% from 1 August 2013. This is anticipated to provide an additional $195 million in revenue for 2013-14.
South Australia has finally caught up with other jurisdictions following the announcement of a legislative exemption scheme for duty arising as part of a corporate reconstruction. The new scheme will commence on 1 July 2013 and replace the current administrative scheme which grants ex-gratia relief of up to 95% of the duty otherwise payable on transfers or the payment of a $1,000 administration fee (if greater). Unfortunately, the eligibility criteria for participation in the new legislative scheme will be consistent with the criteria used under the current administrative scheme so that no relief will be available if the parties fail the 3 year pre-association and post-association tests or if the assets to be transferred do not comprise substantially all of the assets of the business.
The SA government has also introduced a sliding scale of payroll tax concession rates for employers with taxable payrolls less than or equal to $1,200,000 for the 2013-14 and 2014-15 income years. This will decrease revenue by $10.5 million in 2013-14.
Commencing 1 July 2013, the payroll tax tax-free threshold will be increased from $1,010,000 to $1,250,000. This measure is expected to decrease revenue by $9.7 million in 2013-14.
Additionally, on 1 July 2013 the third Employee Incentive Scheme Payroll Tax Rebate will come into force providing a two year payroll tax rebate for all new jobs generated between 10 December 2012 and 30 June 2014, and which are maintained until 30 June 2015. This is worth $500,000 in 2013-14.
Both of the announced payroll tax measures are expected to increase investment and create jobs in Tasmania.
Australian Capital Territory
In line with earlier announcements that conveyance duty would be abolished over the next 20 years, the Australian Capital Territory government announced that the rate of reduction of conveyance duty will be accelerated. In implementing this policy, from 5 June 2013, the highest marginal rate of conveyance duty will be capped at 5.5% for properties valued at $1,650,000 and above (compared to the 2012-13 cap of 7.25% for properties valued at $1,000,001 and above).
However, to offset the loss in revenue which is expected to result from the reduction of conveyance duty, the ACT government has announced that the general rates applicable to commercial properties will be increased.
In the Northern Territory 2013-14 State Budget, two changes were proposed to be made to the Mineral Royalty Act (MRA), with effect from 1 July 2013.
The first change is aimed at minimising transfer pricing, so that if a royalty paying miner sells a mineral to a related company which is based overseas, and that overseas company then on-sells the mineral to a third party purchaser, any profit made by the overseas company through the on-sale which is greater than 5.5% of the value of the relevant mineral (the transfer pricing factor) will generally be taxed in the hands of the royalty payer as if it is profit of the royalty payer. However, the profit made by a related overseas company will be allowed to exceed 5.5% of the value of the relevant mineral where the royalty payer uses a transfer pricing arrangement approved by the Australian Taxation Office.
The second change to the MRA limits the ability to deduct head office costs, management fees and labour costs which can be offset in determining the profits subject to the royalty. Going forward, this is limited to the cost of offices located, expenses incurred, or activities performed, in the NT.
The Western Australia 2013-14 State Budget is scheduled for release on 8 August 2013.
While most of the details remain unknown, it should be noted that the WA government has already introduced an amending Bill which will “unwind” the planned abolition of transfer duty on non-real business assets (such as business licences, goodwill and intellectual property). The abolition of these duties had been scheduled to take place on 1 July 2013.