Tax changes target land sales

Tax professionals have cautiously welcomed state government plans to rewrite the Stamp Act, but have warned that many companies owning land could be surprised to find themselves caught in the tax net.

They are also keen to see how the Office of State Revenue interprets the proposed general anti-avoidance provision, given its reputation for aggressive interpretation of tax laws.

Treasurer Eric Ripper unveiled the government’s plans last week, telling a Taxation Institute breakfast the changes would give WA “one of the most business-friendly Stamp Acts you will see in Australia”.

The proposed reforms represent a substantial simplification of the Stamp Act, which would be reduced from 400 pages to 200 pages.
The reform proposals comprise three major initiatives, which Mr Ripper said would only be accepted as a package.

“Unfortunately it has to be all or nothing,” he said.

Institute of Chartered Accountants of Australia WA general manager Con Abbott said the moves to simplify the Stamp Act were to be welcomed.

He also welcomed the opportunity to be involved in consultation.

“Like all tax changes, it’s very important to look at the detail,” Mr Abbott said.

The changes involve a substantial broadening of the tax base, such that stamp duty would be imposed on virtually all transactions where land worth $2 million or more was acquired through a company or unit trust.

KPMG partner Phil Renshaw said this constituted a significant change, adding that the proposed reforms included a broader linking of associated entities.

The package includes new concessions that have been drafted so that stamp duty does not stop corporate groups adopting a more efficient ownership structure by transferring assets.
However, Mr Renshaw said these changes were relatively minor.

“I don’t think there is a lot there for general business to get any real benefit,” he said.

PKF tax principal Tony Ince said the broadening of the stamp duty net “may catch a few people unawares”.

He noted that the rise in land values meant the $2 million threshold could easily be passed.

Mr Ince added that there could be teething problems with the introduction of a general anti-avoidance provision, as tax advisers learnt how it was to be applied.

Deloitte tax principal Dominik Giemza said the new provision could actually create some uncertainty, given the Office of State Revenue’s reputation.

“If you look at their past record, they are likely to be quite aggressive in applying this,” Mr Giemza said.

Commissioner of State Revenue Bill Sullivan told WA Business News the general anti-avoidance provision would target tax avoidance schemes that were “artificial, blatant and contrived”, and would be exercised in a “very considered manner”.

Mr Ripper said the proposed changes were likely to increase annual revenue collections by an estimated $80-100 million if there were no changes to tax rates.
He emphasised that the reforms were designed to be revenue neutral, and that offsetting cuts would come through either rate reductions or threshold increases.

“The government is not looking to make extra money,” Mr Ripper said.

“It will be revenue neutral.”

The government is seeking industry feedback on its proposed changes.