Page 998 - Week 03 - Thursday, 10 April 2014
Next page . . . . Previous page . . . . Speeches . . . . Contents . . . . Debates(HTML) . . . . PDF . . . . Video
This bill seeks to rectify the issue by instead establishing a process for only charging duty on any premiums paid on a long-term 30-year lease. The premium is an amount paid above the market rent. One way that companies have been able to avoid conveyance duty is to instead charge the lessee a premium on the rental level.
The Commissioner for ACT Revenue may set a threshold level to determine how far above market rent can be defined as a premium. This threshold will be important to ensure that the duty liability does not apply to lessees who are simply paying high rents but are not trying to avoid conveyance duty. The commissioner may require the aid of a valuer to establish the correct threshold to calculate what is a premium. I believe that this is a fairly simple and agreeable proposal, and I support the bill.
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) (4.36), in reply: I thank members for their support. As always with the shadow treasurer, it comes with a barb or two. But such is life.
Mr Smyth: Tell us the percentage and it will all go away.
MR BARR: I look forward to that. The bill replaces existing provisions in the Duties Act 1999 that impose conveyance duty on long-term leases with fairer, simpler and more effective premium-based provisions. The long-term lease provisions in the Duties Act impose a duty on the commercial lease with a term of 30 years or greater. This can be arrived at by a single-term lease or over multiple terms. These provisions function as an anti-avoidance mechanism that captures commercial leasing arrangements which are being used in lieu of a conveyance transfer.
The existing provisions can hinder the development and sustainability of legitimate commercial arrangements by imposing a substantial duty liability on a business. For example, a business that has completed two 10-year terms and entered a 15-year lease that will bring the total term to 35 years would incur a duty liability. This is despite having no intent of gaining any ownership rights of the property or attempting to avoid conveyance duties.
The provisions that are brought forward will impose a duty on a lease that has a substantial premium paid for the grant or transfer of the lease. A premium is defined as any consideration, being monetary or non-monetary, that is paid or agreed to be paid in relation to the lease other than recent reserve. A lease with a considerable upfront premium is a primary characteristic of a commercial lease established to avoid conveyance duty.
The premium paid only becomes liable to a duty once the premium exceeds the determined threshold of 25 per cent above market rent over the term of the lease. Once the premium component exceeds this 25 per cent threshold, the entire premium component becomes liable for duty. The premium threshold will be set by disallowable instrument once the legislation has been passed.
Next page . . . . Previous page . . . . Speeches . . . . Contents . . . . Debates(HTML) . . . . PDF . . . . Video