30 May 2005
Key Points:
While a number of State taxes will be phased out over the next five to six years, the transition period may be challenging for business.
Following pressure from the Federal Treasurer, the States' and Territories' governments (except New South Wales and Western Australia) have agreed to phase out and abolish a number of State and Territory taxes by 2010/2011. The major heads of taxes to be phased out and abolished include mortgage duty, hire of goods/rental business duty, lease duty andduty on conveyance of business assets (other than real property).
Western Australia and NSW are remaining defiant to the demands of Peter Costello, citing concerns that the financial situation of the States will deteriorate under the proposal offered by the Federal Treasurer. Queensland, South Australia, Tasmania, the ACT and the Northern Territory have agreed to abolish a range of taxes by 2011 which was a compromise to the Federal Treasurer's demands to abolish the taxes by 2006.
Timetable
The general timetable for the abolition and phasing out of duties is as follows:
| Timeframe | Victoria | Queensland | South Australia | Tasmania | ACT | NT |
| 2005-2006 | abolition of lease duty and credit business duty | phasing out of mortgage duty | abolition of electronics debts tax | |||
| 2006-2007 | abolition of rental business duty | abolition of hire of goods duty and marketable securities duty | abolition of minor duties | phasing out of 50% of mortgage duty | abolition of 100% of non-realty conveyances | abolition of lease duty and marketable securities duty |
| 2007-2008 | phasing out of 50% of mortgage duty | phasing out of mortgage duty and 33% of rental business duty | abolition of remaining mortgage duty | abolition of hire goods/rental business duty | abolition of hire goods/rental business duty | |
| 2008-2009 | abolition of remaining mortgage duty | phasing out of 67% of rental business duty and abolition of remaining mortgage duty | abolition of 100% of non-realty conveyances | |||
| 2009-2010 | abolition of 50% of non-realty conveyance | abolition of: remaining rental business duty remaining mortgage duty 50% of marketable securities duty 50% of non-realty conveyance | abolition of lease duty | abolition of non-realty conveyance | ||
| 2010-2011 | abolition of 100% of non-realty conveyance | abolition of 100% of non-realty conveyance and marketable securities duty | abolition of marketable securities duty |
By 2011, the State taxes landscape (with the exception of NSW and Western Australia) will likely resemble that of the current Victorian regime under which duty will only be payable on transactions dealing with real property.
An interesting omission from the proposed abolitions of duty is "landrich" duty. These provisions, which apply to tax dealings with landholding private companies and private unit trusts, will likely remain to act as "anti-avoidance" provisions in relation to dealings with real property.
However, the journey to 2011 will likely raise some concerns for businesses. The transitional stages will be a minefield for businesses, given the chaotic manner in which the States and Territories are going about the abolition and phasing out of the various heads of duty. Mortgage duty will likely be an area in which issues will arise. The different timetable and process adopted by Tasmania, Queensland and South Australia will mean that multi-jurisdictional mortgages will need to be examined with care.
