Stamp Act 1921: Exemptions for Mortgage Refinancing & Charitable Vehicle Licenses, Lecture notes of Business

Download Stamp Act 1921: Exemptions for Mortgage Refinancing & Charitable Vehicle Licenses and more Lecture notes Business in PDF only on Docsity! EXPLANATORY MEMORANDUM STAMP AMENDMENT BILL 2005 This Bill amends the Stamp Act 1921 to: • provide that no duty is payable for vehicle licences granted or transferred to a motor vehicle dealer, where the vehicle is to be loaned for charitable or other specified purposes; and • allow for an exemption from mortgage duty for mortgage refinancing loans undertaken by owner-occupiers of homes and small business owners. Vehicle licences The Stamp Act provides that no duty is payable on the grant or transfer of a vehicle licence to a dealer, where the vehicle is to be used for the purpose of selling it in the ordinary course of the dealer’s business, or for the purpose of demonstrating it to prospective purchasers. The Act also allows for the vehicle to be used for “minor incidental purposes”. Following publication of a ruling providing guidance as to what is a “minor incidental purpose”, it was brought to Government’s attention that this exemption was also being claimed for vehicles loaned to charitable organisations. However, no legislation existed to support an exemption in these circumstances. The amendments provide that no stamp duty is payable on the grant or transfer of a motor vehicle licence to a dealer, where the vehicle is to be loaned by the dealer in the following circumstances: • to a charitable organisation to be used solely for providing assistance to underprivileged or disadvantaged persons or for providing emergency assistance; • to a school to be used solely for student driver training; • to an individual solely for a philanthropic purpose approved by the Commissioner; or • solely for a purpose prescribed by regulation. At present, an exempt licence and consequently an exemption from stamp duty, is provided by the Department of Planning and Infrastructure to a charitable organisation that has been endorsed by the Australian Taxation 2 Office as a charitable or public benevolent institution, and the vehicle is to be used for providing direct relief to persons in need of assistance. The stamp duty exemption for a vehicle loaned by a dealer to a charitable organisation has been aligned with the exemption that would apply if the vehicle were directly owned and licensed by the charitable organisation. Accordingly, the parameters for gaining an exemption directly have been recognised by these amendments. The amendments apply retrospectively from 23 August 2000, which is five years prior to the date the Government announced its intention to legislate the exemption. This ensures that the exemption can apply to any relevant grant or transfer of a licence that occurred prior to the date of Assent. A record-keeping requirement has been included to allow for the records that must be kept, to be prescribed. A dealer will be required to record the name of the person or organisation to whom the vehicle is loaned, the purpose for which the vehicle will be used, the date of the loan and a description of the vehicle. The provision also includes a requirement that a dealer must keep the records necessary to enable the Commissioner to determine the dealer’s liability under Part IIIC of the Act. However, it is expected that no additional records will be required than those already kept by the dealers for other regulatory and taxation purposes. There are no financial implications associated with these amendments as it is unlikely that dealers would have been paying stamp duty on the grant or transfer of a licence where the vehicle had been loaned for charitable or philanthropic purposes. Mortgage refinancing loans The amendments provide an exemption from mortgage duty on refinancing of mortgages by owner-occupiers of homes and small business owners. The measure was announced in the 2005/06 Budget. In the case of a home mortgage, the refinancing exemption will apply to owner-occupiers when a home mortgage is refinanced by a new home mortgage. It will also apply where the original mortgage was for the purchase of vacant land and the mortgagor’s principal place of residence is to be constructed on the land. An exemption will also be provided where the original mortgage is refinanced in circumstances where the mortgage was used to purchase an 5 A definition of a charitable organisation has been inserted in section 76B(1). Subparagraph (ii) provides that a vehicle may be loaned to a charitable organisation solely for the purposes of providing emergency assistance. An example of a vehicle loaned for these purposes is a vehicle loaned to an endorsed public benevolent institution or exempt charity, such as a surf life saving club, for the purposes of the rescue work carried out by the organisation. Subparagraph (iii) provides that a vehicle may be loaned solely for the purposes of student driver training by a school as defined by the School Education Act 1999. The School Education Act 1999 defines a “school” as a government school or a non-government school. Subparagraph (iv) provides that a vehicle may be loaned to an individual solely for a philanthropic purpose as approved by the Commissioner of State Revenue. An example of a philanthropic purpose that would be approved is where a dealer loans a vehicle to the parents of children who have severe physical and cognitive disabilities and require transport to medical facilities. Subparagraph (v) provides for a purpose to be prescribed by regulation should any charitable or other specific purposes be identified. It is not intended that any other purposes are prescribed at this time. Paragraph (b) requires that the application for a grant or transfer of the licence under the new provisions, is to be accompanied by a certificate certifying that the vehicle will be used solely for one of the purposes included in paragraph (a) while the dealer is the holder of the vehicle licence. This requirement is consistent with sections 76D(4)(c) and (5)(b) which also require a certificate to be provided when a similar application is made under those sections. Subsection (5b) provides that the Commissioner may approve a philanthropic purpose for a loan of a vehicle for a particular motor dealer or a class of dealers. The Commissioner’s approval 6 may also take effect from a day earlier than the date on which he gives his approval and may take effect retrospectively providing that date is not earlier than 23 August 2000, five years from the date of the Government‘s announcement of its intention to legislate this exemption. Subclause (2) amends section 76D(7) to provide that the certificate that is to accompany the dealer’s application, is to be in the approved form and signed by the applicant. This requirement is consistent with the requirements for certificates made under subsections (4)(c), (5)(b) and (6)(e). Clause 6: Section 76I amended Subclause (1) amends section 76I(1) to include references to new section 76D(5a). The amendment provides that while a dealer remains the licensee of a vehicle which was free of duty on the grant or transfer of the licence for a purpose under sections 76D(4)(a), (5)(a) or (5a)(a) then the dealer must not allow the vehicle to be used for any purpose other than a purpose provided by those subsections. This amendment also provides for circumstances where a vehicle has been licensed for one purpose, a change of use has occurred and the vehicle is being used for another exempt purpose. Subclause (2) amends section 76I(2)(a) by including a reference to new section 76D(5a). Section 76I(2) provides for stamp duty and penalty tax to be payable on the grant or transfer of a licence to a dealer as if it had never been exempt where a dealer uses the vehicle for purposes other than those provided for under sections 76D(4)(a), (5)(a) and (5a)(a). Clause 7: Section 76N inserted This clause inserts section 76N to provide a record-keeping requirement for this Part. Paragraph (a) specifies that records, prescribed by regulation, will be required to be kept by a dealer for the purposes of Part IIIC. It is intended that the dealer keep a record of the name of the person or organisation to whom the vehicle is loaned, the purpose for which the vehicle will be used, the date of the loan and a description of the vehicle. 7 This type of record will also be required to be kept where the vehicle is originally licensed under section 76D(4)(a) or (5)(a), and subsequently used for a purpose under section 76D(5a)(a). In addition, where the purpose is one requiring the Commissioner’s approval under section 76D(5a)(a)(iv), a copy of that approval will be required to be retained. Paragraph (b) provides a dealer must keep any other records necessary to enable the Commissioner to determine a dealer’s liability to pay duty under Part IIIC. An offence penalty of $20,000 is applicable for failure to keep the records as required by this section. Clause 8: Retrospective effect of certain provisions Subclause (1) provides that a retrospective period beginning on 23 August 2000, applies to the new provisions. This subclause provides that if a dealer was a dealer during the retrospective period and, during that period, a grant or transfer of a licence was made to the dealer and the vehicle was loaned in circumstances provided for under new subsection (5a) for the retrospective period, then no duty was payable at that time. The requirement for the application to be accompanied by a certificate is not included for this provision. Subclause (2) provides that the Commissioner can make any assessment or reassessment necessary more than 5 years after the date of assessment. Subclause (3) provides that if the Commissioner makes an assessment or reassessment of a dealer’s liability at a particular time during the retrospective period, then Part IIIC is to be applied as it was in force at that particular time. Subclause (4) provides the necessary definitions for an assessment or reassessment for a particular time during the retrospective period. 10 On returning to Australia, Jim and Mary move into the property and make it their principal place of residence. They decide to refinance the original mortgage to effect improvements on the property. As they continue to live in the residence as their principal place of residence, the outstanding amount of the original mortgage that has been paid out by the refinancing mortgage will be exempt from duty. Paragraph (c) ensures that a mortgage duty exemption applies for refinancing a previous mortgage used to purchase vacant land in the circumstances defined in paragraph (a). Paragraph (d) ensures that the requirement in subsection (2)(b) for the previous mortgage to be a home mortgage, does not apply to the circumstances outlined in paragraphs (a) or (b) above. Paragraphs (c) and (d) are required as the previous mortgage, which was used for the purchase of vacant land or an investment property, would not have qualified as a home mortgage. Subsection (5) provides that section 89(2) does not apply to calculate the amount of the previous secured amount. Section 89(2) sets out how the amount secured by a mortgage is to be determined where there are further advances made under a previously stamped mortgage. As the refinancing mortgage is a new mortgage, and not a further advance made under the previous mortgage, section 89(2) will not apply. Subsection (6) requires the mortgagee to discharge the previous mortgage as soon as practicable. As soon as practicable means as soon as the required mortgage discharge forms are completed and the discharged mortgage is lodged with the Department of Land Information. If the mortgagee does not discharge the previous mortgage, the mortgagor will not lose the benefit of the mortgage duty relief. However, section 105 of the Taxation Administration Act 2003, may apply to the mortgagee’s failure to discharge the previous mortgage and a penalty of up to $20,000 could apply. It is a requirement of the mortgage duty exemption for loan 11 refinancing that the outstanding amount of the previous mortgage is to be paid out in full and discharged. This ensures that the previous mortgage is not available for a further advance to be made under it free of stamp duty. 86B. Exemption – refinancing small business loans Subsection (1) provides that duty is not payable on a business mortgage to the extent to which it refinances a previous mortgage which was used for the purposes of carrying on a business. Where the amount of the advance under the new mortgage exceeds the amount outstanding under the previous mortgage, duty is payable on the excess amount. GVP Pty Ltd supplies office equipment and entered into a mortgage that was used to start up the business. The original mortgage paid for the 12-month lease and fixtures and fittings in the store. The directors of GVP Pty Ltd have decided that they wish to expand the business as it is continuing to attract more customers. They request the bank to lend them sufficient moneys to pay out their original mortgage and also additional money to pay for the extensions. The original mortgage secured an amount of $350,000 and has an outstanding balance of $250,000. GVP’s directors decide to borrow an additional $300,000 so that the new loan is $550,000. Duty will be payable on the additional $300,000 only as the original business mortgage is being refinanced to pay the outstanding amount of $250,000. Subsection (2) provides the requirements for an exemption from mortgage duty to apply when a business mortgage is refinanced. Paragraph (a) requires that the outstanding unpaid amount of the previous mortgage is to be paid out in full. Paragraph (b) requires the previous mortgage to have been a business mortgage. A previous mortgage is a business mortgage if part or all of the secured amount was used for the purposes of carrying on a business. Paragraph (c) requires the previous mortgage to be discharged. 12 Paragraph (d) requires one or more of the mortgagors for the new mortgage and the previous mortgage, to be the same. Paragraph (e) requires one or more of the owners of the business to be the same at the time the previous and new mortgages were entered into. The inclusion of this requirement is in recognition of usual business practices where a mortgagor may be a separate entity to the business owner. Paragraph (f) requires that all or part of the property, that is security for the new mortgage, was also security for the previous mortgage. Subsection (3) provides that an exemption from mortgage duty does not apply to a refinancing mortgage in certain circumstances. Paragraph (a) provides that a mortgage duty exemption does not apply unless the amount outstanding under the previous mortgage is less than or equal to $5 million. For example, a company has a previous business mortgage which secured an amount of $10 million. The amount outstanding on the mortgage is $4 million. The mortgage duty refinancing exemption will apply to a new business mortgage of $4 million which is to refinance the previous mortgage. If the amount outstanding on the previous mortgage was $7 million, the mortgage duty exemption would not apply to a refinancing mortgage of $7 million. The first $5 million of the $7 million would also not be exempt from mortgage duty. Paragraph (b) provides that the mortgage duty exemption does not apply unless the secured amount under the new business mortgage is less than or equal to $5 million. An example of this is a previous business mortgage, that originally secured an amount of $25 million, with an outstanding amount payable of $3 million. The new business mortgage secures an amount of $15 million, $3 million of this amount is to refinance the original business mortgage. No mortgage duty exemption will apply to the refinancing amount of $3 million, as the new secured amount is more than $5 million. Paragraph (c) specifies that the mortgage duty exemption will not apply unless Western Australian mortgage duty was payable