Key revenue measures announced in this year’s budget include, among other things: 

  • Cessation of the Temporary Budget Improvement Levy from 1 July 2003
  • A reduction in the pay-roll tax rate from 6.3 per cent to 6.2 per cent
  • A new exemption for the commercial leases and franchises with an average rent of $30 000
  • An increase in the Hiring Arrangements Exemption Threshold from $36 000 to $90 000
  • Changes to the stamp duty treatment of landholding companies and unit trusts
  • Changes to the mineral royalty treatment of exploration expenditure
  • Administrative matters

The measures also include enhancements to the equity, efficiency and administration of Territory taxes and a number of integrity and anti-avoidance measures.

    Early Cessation of the Temporary Budget Improvement Levy

Introduced as part of the November 2001 Mini-Budget, this measure was due to cease on 28 November 2004 for new motor registrations and from 4 January 2005 for motor vehicle registrations due for renewal on or after that date. The cessation date for the levy has been brought forward to 1 July 2003. This will:

  • reduce levy collections by an estimated $8.4 million in 2003-04;
  • reduce the Territory’s registration fees (excluding third party insurance) to one of the lowest in Australia; and 

benefit the owners of over 90 000 vehicles currently subject to the levy.

Pay-roll Tax Deduction

In accordance with the Government’s pre-election commitment to reduce the pay-roll tax burden on businesses, the payroll tax rate will reduce from 6.3 per cent to 6.2 per cent from 1 July 2003.

The reduction is expected to reduce pay-roll tax collections by $1.5 million per year on a full-year basis and benefit almost 1 400 businesses.

New Stamp Duty Exemption for Commercial Leases and Franchises with average Rent of $30 000 or less

From 1 July 2003, a new stamp duty exemption is provided for commercial leases and franchises with average lease or franchise payments of $30 000 per annum or less.

The new exemption is expected to exempt over 450 leases and franchises from stamp duty each year, most of which are held by smaller Territory-based businesses. This comprises nearly half of all leases and franchises that would have been previously subject to stamp duty.

This measure is expected to reduce stamp duty collections from leases by $140 000 per year.

Increase in the Hiring Arrangements Exemption Threshold from $36 000 to $90 000

From 1 July 2003, the exemption threshold that applies to hiring businesses before their hiring receipts become subject to stamp duty will increase from $36 000 per annum to $90 000 per annum. This increase will result in the Territory having the third highest exemption threshold for hiring duty in Australia and releases 34 businesses from liability, comprising 15 per cent of all the businesses that pay this tax.

Stamp Duty on Landholding Companies and Unit Trusts

The measures include new rules that apply from 27 May 2003 for the assessment of stamp duty on changes in the ownership of companies and unit trusts that hold land situated in the Territory. These changes align the duty consequences of indirect and direct acquisitions of interests in land.

Under the new rules:

  • the requirement under the existing “land rich” stamp duty legislation for land to comprise 60 per cent or more of all the assets of a company or unit trust is removed. Transitional provisions preserve the previous 60 per cent land rich test for transactions that occurred prior to 27 May 2003;
  • the “land rich” stamp duty majority acquisition rules have been more closely aligned with the stamp duty implications of acquiring land directly; and
  • the treatment of acquisitions of interests in companies and unit trusts that are quoted on a recognised financial market (such as the Australian Stock Exchange) has been clarified such that:
  • an acquisition of interests in a quoted company or unit trust will continue to be excluded from “land rich” stamp duty; and
  • 'land rich' stamp duty will apply to a subsequent acquisition of interests in such an entity after it becomes unquoted where a majority interest has been acquired or increased as a result of that acquisition.

In addition, the existing stamp duty legislation provides a stamp duty exemption for direct transfers of pastoral land between family members. This exemption has been mirrored to provide a similar exemption to transfers of indirect interests between family members in companies and unit trusts that hold pastoral property.

The measure is expected to increase stamp duty collections by approximately $2 million per year.

Changes to the Mineral Royalty treatment of Exploration Expenditure

The measures include significant changes to the mineral royalty treatment of exploration expenditure, effective from 1 July 2003.

Under the changes provided in the Budget:

  • the 50 per cent uplift factor is to be removed so that 100 per cent of exploration expenditure can be claimed as a deduction; and
  • the exploration expenditure cap is to be reduced from 35 per cent to 25 per cent of the royalty that would otherwise be payable.

These changes are expected to increase mineral royalty collections by $3.8 million in 2003-04, and these funds are to be channelled into new exploration assistance initiatives.

From 1 July 2003, EEC's will no longer be issued in respect of exploration expenditure incurred on or after that date. Miners will still be permitted to draw on the existing stock of unclaimed EEC's for the purposes of claiming royalty deductions, however only until 30 June 2010, by which time the unclaimed stock is expected to have cleared.

The Government will provide exploration assistance initiatives under the Building the Territory’s Resource Base program to the extent of $15.2 million  over the next four years. In three years, a review of the program will be undertaken to determine its effectiveness and future arrangements.

Miners will continue to be permitted to claim exploration expenditure incurred on their mining tenement as a royalty deduction to the extent allowed under the new arrangements. Where exploration expenditure incurred by a miner on their mining tenement is unable to be claimed due to it exceeding the 25 per cent exploration expenditure cap or as a result of a miner not being in a royalty-paying situation, this expenditure is able to be carried over to future royalty periods.

Efficiency, Equity and Administrative Enhancements

The Government has approved a package of changes that enhance simplicity, efficiency and equity of the Territory’s tax regime. These measures will decrease revenue collections by less than $50 000 per year. These measures include:

  • simplifying the administration of payroll tax by allowing group employers to provide only one monthly tax payment for wages paid by the group effective from 1 July 2003;
  • making dealers of used cars jointly and severally liable with the purchaser for the stamp duty payable on the transfer of the motor vehicle registration certificates for those cars effective from a date to be proclaimed;
  • allowing a refund of stamp duty on the cancellation of the sale of a motor vehicle effective from 1 July 2003;
  • providing a stamp duty exemption for conveyances of property back to former bankrupts effective from 1 July 2003;
  • providing a stamp duty exemption for temporary transfers of fishing licences effective from 1 July 2003; 
  • clarifying that a “conveyance” of an entity’s assets occurs where a statute provides that the entity is subsumed by another entity is subject to stamp duty, effective from 27 May 2003;
  • providing an exemption for agreements under seal from deed duty effective from 1 July 2003; and
  • a number of other minor changes that clarify the operation of the stamp duty and first home owner grant legislation.

Anti-Avoidance Measures

The Government is to provide a range of anti-avoidance measures to rectify loopholes:

  • that allow a reduction in “land rich” stamp duty through a scheme using accumulating acquisitions;
  • in the payroll tax grouping provisions relating to discretionary trusts;
  • in the “Clayton’s contract” provisions involving the use of unit trusts; and
  • in the stamp duty exemption provided for a change of trustees. 

These measures commence from 27 May 2003.

Other Changes

The Budget revenue measures also include the cessation from 1 July 2003 of the solar subsidy provided for first home buyers of up to $400 (where Government contributed $250 and industry up to $150). The subsidy has been effectively replaced by the solar hot water subsidies of around $800 to $1 000 available from certain energy utilities, such as PowerWater, as a consequence of the Commonwealth Government’s Renewable Energy Certificate scheme.

In addition, as part of the introduction of the Land Development Corporation, the Trade Development Zone Act is to be repealed. As a result, the tax and duty exemptions provided by this Act will cease from 1 July 2003.

To compensate for this change, the Government is to provide a payroll tax waiver to Trade Development Zone licensees for the remaining term of their licenses. Moreover, Government will introduce from 1 July 2003 a new initiative called the Trade Support Scheme, which will significantly increase the range of export-related services and financial support available for Territory businesses.

The net impact of the repeal of the Trade Development Zone Act, the funding for the Trade Support Scheme and the payroll tax waiver is expected to be Budget neutral.