Northern Territory Revenue - Revenue Discussion Paper · 3 Structure and limitations of Northern Territory revenue sources 5 ... of its revenue from the Commonwealth Government,

RevenuePaper.nt.gov.au

DEPARTMENT OFTREASURY AND FINANCE

Northern Territory RevenueDiscussion PaperNovember 2017

http://revenuepaper.nt.gov.au

ii | Northern Territory Revenue Discussion Paper

November 2017 | 1

ǀǀContents

1 ObjectivesoftheNorthernTerritoryRevenueDiscussionPaper 2

2 Consultationprocess 4

3 StructureandlimitationsofNorthernTerritoryrevenuesources 5

4 KeyfiscalandeconomicchallengesfacingtheNorthernTerritory 9

5 NorthernTerritoryown-sourcerevenue 12

6 Payroll tax 18

7 Property taxes 23

8 Gamblingtaxes 31

9 Motorvehicletaxes 36

10 Insuranceduty 40

11 Bankingtaxes 42

12 Mineralroyalties 44

13 Petroleumroyalties 51

14 Otherown-sourcerevenuebases 55

15 Recentstatetaxationreforms 57

2 | Northern Territory Revenue Discussion Paper

1 ObjectivesoftheNorthernTerritoryRevenueDiscussion Paper

1.1 WhyareweconsultingthecommunityabouttheTerritory’smain own-sourcerevenues?TheNorthernTerritoryreceivesthemajorityofitsrevenuefromtheCommonwealthGovernment,moresothantheotherstatesandterritories,boththroughGSTdistributionandtiedgrants.

Nevertheless,theimportanceoftheTerritoryhavingarobust,efficient,stableown-sourcerevenuebasehasneverbeenmoreapparentthanthroughthe2017BudgetperiodwhensignificantchangesinGSTrevenue,whicharebeyondthecontroloftheTerritory,substantiallyimpactedonGovernment’sabilitytoplananddeliveressentialservices.

TheTerritoryGovernmentwillcontinuetolobbytheAustralianGovernmenttoensuretheTerritoryreceivesitsfairshareoftheGST,alongwithcontinuingthedebatearoundnationaltaxreform.

Inthemeantime,itisimportanttheTerritoryconsidersimprovingitsown-sourcerevenuebase.TaxesandroyaltiesraisedbytheTerritorydirectlyassisttoprovideessentialgovernmentservicessuchashospitalsandhealthcare,policeandemergencyservices,education,familysupportandvitalinfrastructure.Fundingrequirementsfortheseservices,especiallyhealthandeducation,willcontinuetogrow,placingincreasingfiscalpressureontheTerritory.

Consequently,TerritorytaxesandroyaltiesmustprovidethefundingrequiredtocontinuetoprovidethequalitygovernmentservicesTerritoriansexpectanddeserve.Wemustraiserevenueinasustainablemannerthatdoesnotundulyimpedeinvestmentandbusinessdecisions,reducesredtapeandcomplianceeffort,andprovidesgovernmentwithstabilityandcertaintytoplanandbudget.

AnexaminationofTerritorytaxesandroyaltiesisnotsimplyaboutloweringorraisingtaxesorroyalties,orintroducingnewtaxesorabolishingcurrenttaxes.Itisaboutdevelopingtaxandroyaltysystemsthatraiseenoughrevenuetofundservicesandinfrastructurewhilebeingfairandefficient.BalancingtheseobjectivesisimportantinassistingtheTerritorytogrowandprosper.

1.2 ObjectivesandfiscalstrategyTheTerritoryGovernment’sfiscalstrategyinrespectofitsrevenuerequirementsistomaintainacompetitivetaxenvironmentthatencouragesinvestment,createsjobsandattractsbusinesstotheTerritory,whileraisingsufficientrevenuetocontributetofundinggovernmentservicedelivery.

Accordingly,Territorytaxesandroyaltiesneedto:

• deliversufficientrevenuenowandintothefuturetoallowGovernmenttodeliverservicesandinfrastructuretoTerritorians

• beasefficientandfairaspossible,makingsureeveryonecontributestothedevelopmentoftheTerritory,havingregardtotheircapacitytodoso

• beassimpleaspossibletominimisecomplianceandadministrationcosts

• beasstableandpredictableaspossiblesoGovernmentcanplanandbudgetforthefuture

• supportjobcreationandnotactasabarriertoinvestmentintheTerritorybyremainingcompetitivewiththeotherjurisdictions.

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TheseprinciplesarethefundamentalareasonwhichGovernmentwishestoengagewiththecommunitytodiscusstheTerritory’staxesandroyalties.

1.3 NatureoftheDiscussionPaperThisDiscussionPaperwillallowTerritorianstohavetheirsayonthefuturedevelopmentoftheTerritory’staxandroyaltypolicies.ThepaperprovidesasummaryoftheTerritory’staxandroyaltysystems,settingoutpolicyobjectives,alongwitheconomicefficienciesandinefficienciesofthecurrent system.

Thepaperalsoprovidesarangeofreformoptionsthatcouldbeconsidered,inordertoassistinstimulatingcommunityinputtogovernmentpolicy.TheseoptionsarenotrecommendationsanddonotreflectanypolicyproposaloftheGovernment.


2 Consultationprocess

TheGovernmentencouragesinterestedpartiestomakeawrittensubmissionregardingthisDiscussionPaper.ThesesubmissionswillassistGovernmenttoprepareitstaxationandroyaltypolicies,considertheneedandappropriatenessforreform,andfeedintothedevelopmentofrevenueoptionsaspartofitsBudgetprocesses.

Inadditiontoseekingwrittensubmissions,publicconsultationwithinterestgroups,peakbodiesandthebroadercommunitywillaccompanytheDiscussionPaper.Thedatesofpublicconsultationwillbereleasedshortly.

2.1 KeydatesNovember2017: DiscussionPaperreleasedforconsultation

NovembertoJanuary2017: Engagementwithindustryandpeakbodies,publicinformationsessions

28February2018: Closingdateforwrittensubmissions

Anychangestothesedates,alongwithupdatesontimingofconsultationprocesses,willbeadvised on RevenuePaper.nt.gov.au

2.2 SubmissionsSubmissions can be lodged via the following methods:

Email: [email protected]

Mail: DepartmentofTreasuryandFinance Revenue Discussion Paper GPOBox154 DARWINNT0801

Hand delivery: DepartmentofTreasuryandFinance Revenue Discussion Paper Level14,CharlesDarwinCentre 19TheMall DARWINNT0801

AllsubmissionswillbepubliclyavailableandpublishedtothewebsiteRevenuePaper.nt.gov.au,unlessyouspecificallyrequestotherwiseinyoursubmission.


mailto:RevenuePaper.dtf%40nt.gov.au?subject=


November 2017 | 5

3 StructureandlimitationsofNorthernTerritoryrevenue sources

3.1 NorthernTerritorysourcesofrevenueTheTerritory’stotalrevenuecomprises30percentown-sourcerevenueand70percentCommonwealthrevenue.Bycontrast,thesplitforotherjurisdictionsisabout55percentown-sourcerevenueand45percentCommonwealthrevenue.

TheTerritory’sown-sourcerevenueprimarilycomprisestaxesandroyalties,butalsoincludesfeesandcharges,rentandtenancyincome,interestanddividendrevenue,andprofitandlossonthedisposalofassets.Own-sourcerevenueprovidesfiscalautonomytotailorinfrastructureandservicestomeetajurisdiction’sneeds.

CommonwealthrevenueprovidedtotheTerritorycomprises:

• goodsandservicestax(GST),whichaccountsforabouthalfoftotalTerritoryrevenue

• tiedpayments,whichaccountforabout20percentoftotalTerritoryrevenue.

ThedifferenceintheimportanceofCommonwealthrevenuetotheTerritoryisdemonstratedinChart3.1,whichshowsstateandterritoryrevenuesbysource.

Chart3.1:StateandTerritoryRevenuesbySource,2015-16

Source:Commonwealth2015-16FinalBudgetOutcome;stateandterritory2015-16annualfinancialreportsor2016-17mid-yearreports

• TheTerritoryreceivesmostofitsrevenuefromtheCommonwealth,moresothantheotherstatesandtheAustralianCapitalTerritory.

• LikeotherstatesandtheAustralianCapitalTerritory,theTerritoryhaslimitedpowerstoimposeonlyanarrowrangeoftaxesandroyalties.

• ChangestoGSTdistribution,whichprovideshalfoftheTerritory'srevenue,havealargeimpactontheTerritory'sBudget.

0

20

40

60

80

100%

NSW Vic QldWA SA TasACT NT TotalOwn-source revenue GST Tied Commonwealth payments


3.2 LimitationsontheTerritory’staxationandroyaltypowersTheTerritory,liketheotherstatesandtheAustralianCapitalTerritory,haslimitedpowerstoimposeonlyanarrowrangeoftaxesandroyalties,whereastheCommonwealthhasaccesstobroad,stablegrowthtaxes.However,statesandterritorieshaveprimaryresponsibilityfordeliveringthemajorityofgovernmentservices,suchashealthcare,education,andlawandorder.

Thismismatchbetweentherevenue-raisingpowersoftheCommonwealthandservicedeliveryresponsibilitiesofthestatesisreferredtoasverticalfiscalimbalance.ItisthereasonstatesandterritoriesneedtorelyonCommonwealthrevenuetodeliverservices.

Table3.1:LimitationsonNorthernTerritorytaxingpowers

Taxes the Territory can imposeCommonwealthtaxes,whichcan’tbeimposed

by the Territory Government

• Payroll tax

• Stampdutiesonpropertyandinsurance

• Land tax

• Gamblingtaxes

• Feesandcharges,forexample,motorvehicleregistrationfees

• Miningroyalties(exceptonuranium)

• Onshorepetroleumroyalties(butnotonoffshoreproduction)

• Consumptiontaxes,forexample,GST

• Company taxes

• Personal income taxes

• Offshorepetroleumroyalties,forexample,the Petroleum Resource Rent Tax that appliestotheINPEXproject

• Sales taxes

• Customsandexciseduties,forexample,taxesontobacco,alcoholandpetrol

AssetoutinChart3.2,thislimitationonstateandterritorytaxpowersmeansstatesandterritoriesareresponsibleforabout42percentoftotalgovernmentexpenditurebutonlyraiseabout25percentoftotalrevenue.Bycomparison,theCommonwealthraisesabout75percentoftotalnationalrevenuebutitsexpenditureobligationsamounttoabout58percentoftotalexpenditure.

Chart3.2:VerticalFiscalImbalance2015-16

Source:Commonwealth2015-16FinalBudgetOutcome;stateandterritory2015-16annualfinancialreportsor2016-17mid-yearreports

DuetothisimbalancebetweenthetwolevelsofgovernmentsthereisaneedforrevenuetobetransferredfromtheCommonwealthtothestatestoensuregovernmentservicescancontinuetobedelivered,whichtakestheformofGSTrevenueandtiedpayments.

0102030405060708090

100

Revenue ExpenditureCommonwealth States

Vertical fiscalimbalance

%

November 2017 | 7

3.3 ConstraintsonCommonwealthrevenuetotheTerritory3.3.1 Constraints to the GSTGSTisaconsumptiontaxand,becauseithasamuchbroaderbasethanmostothertaxes,isconsideredaneconomicallyefficienttax.However,theGSTcouldprovidegreaterrevenuetostatesand territories.

Australia’sGSTrateis10percent,oneofthelowestamongdevelopedcountries.TheGSThassignificantexemptionsforfreshfood,health-relatedservices,education,childcareandutilitiesservices,whichbenefitconsumersbutreduceGSTrevenueandaddcomplexityandcoststobusiness.

Only49percentofAustralia’snationalconsumptionissubjecttoGST,comparedtotheOECDaverageconsumptiontaxationratioof56percent,or55percentinGermany,71percentinSwitzerlandand97percentinNewZealand.

Furthermore,sincetheintroductionofGSTinJuly2000,therehasbeenanotableshiftinconsumerspendingpatternsfromitemsthatattractGSTtothosethatareGST-exempt,notablyeducationandhealth-relatedservices.

TheseexemptionsandchangedconsumerhabitshaveresultedinamoderationinthegrowthofGSTcollections.IntheinitialyearsofGSTtheaverageannualgrowthrateofcollectionswasaround8.2percent.Morerecently,averageannualgrowthhasbeenaround3.9percent.

RegardlessofwhetherchangestoGSTwouldbeunanimouslysupportedbystates,thecurrentCommonwealthGovernmenthasmadeitcleartherewillbenochangetoGST–baseorrate–duringthistermofGovernment.

TheTerritoryfacesriskstoitsshareofGSTcollectionsasaresultofthefactorstakenintoaccountincalculatingstates’shares.

BesidesthegrowthintheamountofnationalGSTcollections,theotherparametersthatinfluencetheamountofGSTreceivedbytheTerritoryareGSTrelativitiesassessedbytheCommonwealthGrantsCommissionandtheTerritory’sshareofthenationalpopulation.

ThechallengesfacingtheTerritoryregardingpopulationgrowthareaddressedinChapter4.CombinedwithadeclineintheTerritory’sshareofnationalpopulation,asignificantreductionintheTerritory’sGSTrelativityin2017hadthesignificanteffectofreducingtheTerritory’sexpectedGSTreceiptsby$2billionovertheforwardestimates,withGSTrevenuenotexpectedtoreturnto2016-17levelsuntil2020-21.ThisissetoutinChart3.3below.

Chart3.3:VariationstoGSTrevenuesinceAugust2016Pre-ElectionFiscalOutlook

Source:NorthernTerritory2017-18BudgetPaperNo.2BudgetStrategyandOutlook

2800

3000

3200

3400

3600

3800

4000

2017 2018 2019 2020 2021

2016 Pre-ElectionFiscal Outlook

2017-18 Budget

($M)

Year ended June


3.3.2 Constraints to tied Commonwealth paymentsTiedCommonwealthpaymentsareprovidedtosupporttheachievementofoutcomesinaparticularsector,deliveryofspecifiedprojectsortofacilitatenationalreforms.Theyaregenerallysubjecttoachievingdefinedmilestonesorperformancebenchmarksandareoftentimelimited.Assuch,theycannotbereliedonasaguaranteedongoingsourceofrevenueforthestates.

Inaddition,tiedpaymentsareoftenprovidedtopursueCommonwealthGovernmentpriorities,whichmaynotalwaysalignwiththeTerritory’spriorities.

TherehasbeenincreasinguncertaintyaroundCommonwealthfundinginrecentyearswiththeCommonwealthpreferringnottocommittofundingformostNationalPartnershipAgreementsbeyondonetotwoyears;reducingorterminatingNationalPartnerships;andintroducinginputcontrolsandgreaterlevelsofprescriptionthatimpactstates’autonomytodeliverservicesforwhichtheyareresponsible.

WithoutsustainableCommonwealthpayments,bothtiedandgeneralrevenueassistance,theTerritorywouldneedtoapplyahighertaxburdenonitscitizensorraisesignificantlevelsofdebtinordertomaintainexistingservicedeliverylevels.Alternatively,itwouldneedtoreducethelevelofservice delivery.

3.4 NationaltaxreformStatesandtheCommonwealthcontinuetoinvestigatearangeofCommonwealthandstatetaxandrevenuereformoptions,includingproposalstoshareCommonwealthpersonalincometaxrevenuewiththestates.Itishopedthisworkwillidentifyanappropriatemeasurethatwill:

• providestateswithaccesstoabroadrevenuebasethatgrowsinlinewiththeeconomy

• reducethenumberoftiedCommonwealthgrantstothestates,providingthemwithgreaterautonomyandreducingadministrativeburden

• createflexibilityforstatestomeettheirongoingexpenditureneeds.

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4 KeyfiscalandeconomicchallengesfacingtheNorthern Territory

4.1 KeyfiscalpressuresHealth,education,publicorderandsafety,andhousingandcommunityamenitiescomprisetwothirdsoftheTerritoryBudgetandaresubjecttothegreatestfiscalpressuresarisingfromgrowthinbothdemandandthecostofprovidingthoseservices.

TheTerritoryhasasmallpopulationdispersedoveralargelandmassthatisisolatedfromAustralia’smainpopulationcentres.Aboriginalpeople,whocomprisearound30percentoftheTerritory’spopulation,tendtoliveinmoreremoteareasandusemainstreamservicesmoreintensivelycomparedtothenon-Aboriginalpopulation.

ThesefactorsaffectboththedemandforandcostofgovernmentservicesandresultintheTerritoryneedingtospendmorethandoublepercapitaongovernmentservicesthantheaverageoftheotherjurisdictions.ThisisdemonstratedinTable4.1

Table4.1:Generalgovernmentoperatingexpensespercapita,2015-16($)

NT ACT TAS WA SA QLD VIC NSW

24009 12536 10448 11140 9976 10251 8725 9328

Source:ABS,GovernmentFinanceStatistics,Australia2015-16,April2017.ABS,AustralianDemographicStatistics,December 2016

ChangestotheleveloftiedCommonwealthpaymentsandthedeclininggrowthinGSTcollectionsarebothcontributingtothefiscalpressuresexperiencedbystates.Asaresult,Commonwealthfundingisnotexpectedtogrowinlinewithdemandforservices,particularlyhealthcareandeducation,overthemediumtolongterm.

Sincethe2014-15CommonwealthBudgettherehasbeensignificantuncertaintyaroundtheCommonwealth’sfuturefundingforhealthandeducation,withaproposaltomoveawayfromactivityorneeds-basedfundingtoaflatindexationarrangement.Indexationislikelytoresultinashortfallforjurisdictionswithhigherdemandgrowth,includingtheTerritory.Accordingly,theTerritoryisfacedwithsignificantfundinguncertaintyinthelongterm.

• TheTerritorydeliversthesamescopeofservicesasthoseprovidedbyotherstatesbutfaceshigherdemandandservicedeliverycosts.

• DemandfortheseservicesisexpectedtooutpaceCommonwealthfundinggrowthoverthemediumtolongterm.

• TheTerritorycontinuestoneedtoinvestinclosingthegapinoutcomesbetweenAboriginalandnon-AboriginalTerritorians.

• TheTerritoryhasasmall,openeconomythatissignificantlyinfluencedbymajorprojectsandcyclicalsectorssuchasminingandconstruction.Thisresultsingreaterrevenuevolatilitythan other states.

• LowpopulationgrowthmaynegativelyaffecttheTerritory’sshareofGST.


Inaddition,inits2017-18Budget,theCommonwealthannouncedtheQualitySchoolsfundingandreformpackage2018-2027.Underthispackage,theleveloffundingforTerritorygovernmentschoolswillbelessthanundertheexistingarrangements.

Thesefiscalpressuresareexpectedtobefurthercompoundedby:

• challengingeconomicconditions

• theTerritory’spossibleexpenditurecommitmentsundertheNationalDisabilityInsuranceScheme

• costsofanyreformsundertakeninresponsetofindingsoftheRoyalCommissionintotheProtectionandDetentionofChildrenintheNorthernTerritory.

4.2 PopulationanddemographicchangeFiscalpressureswillbeinfluencedbydemographicchangeintheTerritory,withthemainfactorsbeing:

• thecontinuedhighproportionofthepopulationthatisAboriginalorwholiveinremoteareas

• slowoverallpopulationgrowthintheshorttomediumterm

• anageingpopulation.

AsatJune2016therewereapproximately10.4peopleofworkingage(15to64)foreveryonepersonaged65andoverintheTerritory,comparedtoaratioof4.3nationally.However,theTerritorypopulationisprojectedtoageinthefuture.AnolderpopulationbasecanimpactontheTerritorybudgetthroughincreaseddemandforservices,especiallyhealthcare,andareductioninthesizeofthepotentialtaxbase.

ItisexpectedthattheTerritory’spopulationgrowthwillcontinuetobeslowintheshortterm.ThisincludestheeffectofaproportionofresidentconstructionworkersdepartingtheTerritorywhentheINPEXprojecttransitionsfromtheconstructiontooperationalphase.

4.3 EconomyTheminingandconstructionsectorsaretwoofthelargestcontributorstoTerritorygrossstateproduct(GSP).Botharecyclicalindustries,whichleadstovariationsintheirlevelofcontributiontotheeconomy,whichcanexacerbatefiscalpressures.

TheminingandconstructionindustrieswerekeycontributorsofeconomicgrowthintheTerritoryduringtheminingboom.Futuregrowthprospectsfortheseindustriesisreliantonoverseasdemandandinvestment,andsubjecttomovementinglobalcommoditypricesandtheexchangerate.

November 2017 | 11

Chart4.1:Territoryindustryproportionofgrossstateproduct

Source:ABSCatNo.5220.0

TheoutlookforthestructureoftheTerritoryeconomywillbeheavilyinfluencedbythetransitionoftheINPEXprojectfromtheconstructiontoproductionandexportphase.

AsexportsarenotsubjecttoGST,thegrowthintheTerritoryeconomydrivenbyexportsfromtheINPEXprojectmaynotcorrespondtoanincreaseintheTerritory’scontributiontothetotalrevenuecollectedthroughGST.Also,offshoregasisnotsubjecttoroyaltiesintheTerritory.

Inrecentyears,therehasbeenaclearshiftintheTerritoryandnationallytowardspart-timeemploymentasastrongercontributortoemploymentgrowththanpreviousyears(Chart4.2).Thismayindicatepayrolltaxandconveyancedutyrevenuemaygrowataslowerratethanpreviouslyasmorepeopleareemployedonapart-timebasisratherthanafull-timebasis.

Chart4.2:Territoryfull-timeandpart-timeemployment(year-on-yearchange)

Source:ABSCat.No.6202.0

25%

20%

18%

16%

14%

4% 3%

Other services

Government and community services

Construction

Mining and manufacturing

Non-industry

Retail and wholesale trade

Agriculture, forestry and fisheries

-10

-5

0

5

10

15

20

07 08 09 10 11 12 13 14 15 16 17 18Year ended June

%

Part-time employmentFull-time employment


5 NorthernTerritoryown-sourcerevenue

5.1 Componentsofown-sourcerevenueTerritoryown‑sourcerevenuepredominantlycomprisestaxesandminingrevenuebutalsoincludesfeesandcharges,rentandtenancyincome,interestanddividendrevenue,andprofitandlossonthedisposalofgovernmentassets.

TaxationandminingroyaltiesareanimportantrevenuesourcefortheTerritory.In2016-17,own-sourcetaxationandminingroyaltiescontributedover$768millionofTerritoryrevenue.TaxationandroyaltyreceiptsarethesecondlargestrevenuesourcefortheTerritorybehindGSTgrants.

Themaincontributorstoown-sourcerevenuearetaxesonemployers(payrolltax)at$313millionoralmost40per cent,miningandpetroleumroyaltiesat$165million,or21percent,andtaxesonproperty(conveyancestampduty)at$105million,or14percent.ThisissetoutinChart5.1below.

Chart5.1Mainown-sourcerevenuecategories,2016-17

Source:DepartmentofTreasuryandFinance

• TheTerritoryleviessimilartaxesandroyaltiesastheotherstatesandtheAustralianCapitalTerritory.

• Territorytaxesandroyaltiesaregenerallyvolatileanddifficulttoforecast.

• Inaggregate,Territoryown-sourcerevenuesareamongthelowestinAustralia.

$313M

$165M

$105M

$72M

$70M

$43M

Payroll tax

Mining and petroleum royalties

Conveyance stamp duty

Gambling taxes

Motor vehicle taxes

Insurance duty

November 2017 | 13

Table5.1summarisestaxationreceiptsfor2016-17andforecastsfortheforwardestimatesperiod.

Table5.1Own-sourcerevenuecollectionsandforecasts

Mainown-source revenuecategories 2016-17 2017-18 2018-19 2019-20 2020-21

$000 $000 $000 $000 $000

Miningroyalties 165378 225037 175438 175438 175438

Taxes on employers 313156 260 030 248716 257410 263845

Taxes on property 105096 103532 106444 109423 112146

Taxesongambling 71615 78 016 82 676 85867 89198

Motorvehicletaxes 70 371 76 713 79306 81992 84755

Taxes on insurance 42851 39255 40040 40841 41658

Total 768 467 782 583 732 620 750 971 767 040


5.2 Factorsaffectingmainown-sourcerevenuebasesIdeally,own-sourcerevenuewouldbebroadlypredictableandgrowatasimilarratetotheeconomy,providingfundingcertaintyforservicedelivery.However,someoftheTerritory’sown-sourcerevenuesourcescanfluctuatesignificantlyfromyeartoyear.Asidefromshort-termvariability,long-termgrowthinrevenuesalsovaries,withsomerevenuelineshistoricallygrowingfasterorslowerthanothers.

TaxesthatvarystronglyfromyeartoyeararemoredifficulttoforecastaccuratelyandmakeitdifficultfortheTerritorytoplanfuturespending.

5.2.1 Payroll taxPayrolltaxrevenuetendstobeinfluencedbybroadeconomictrends,whichaffectemploymentsuchasemploymentgrowth,wagesgrowth,compositionofpartandfull-timeemploymentandaveragehoursworked.Broadly,payrolltaxrevenueisexpectedtogrowinlinewithgrossstateproduct(GSP)andtoberelativelystable,whichallowsforecastingofthisrevenuebasetobereasonablyaccurateandprovidesareliablesourceofrevenuetofundgovernmentexpenditure.

However,twofactorsaffectthisstabilityandpredictabilityintheTerritory.First,theTerritoryhistoricallyhasbeendependentonmajorcapitalprojectsforalargeproportionofitseconomicgrowth.Thiscanleadtopeaksandtroughsinresidentemploymentbetweenmajorprojectsandtothecontributionofwagespaidtofly-infly-out(FIFO)workerstopayrolltaxrevenue.

Second,duetotheTerritory’shigh$1.5milliontax-freethreshold,compositionalchangesinemploymentbetweensmallandlargefirmscanaffectpayrolltaxreceiptsinamannerinconsistentwitheconomicgrowthtrends.Forexample,ariseinsmallbusinessemploymentmaynotcorrespondwithanincreaseinpayrolltaxrevenue.

5.2.2 Conveyance stamp dutyConveyancestampdutyrevenueislinkedtothevolumeandpricesofresidentialandcommercialpropertymarkets,whichcanvarysignificantlyfromyeartoyearandareoftenaffectedbythecommencementorcessationoflargeprojects.


Conveyancedutyreceiptsvaryyeartoyearduetolargeone-offreceiptsfromsignficantcommercialtransactions,suchasthesaleofminesorpastoralproperties.Forexample,in2014-15,afewlargecommercialtransactionssawconveyancestampdutyrevenueincreaseto$265millioncomparedto$142millioninthepreviousyearand$114millioninthesubsequentyear.

5.2.3 Mining and petroleum royalties MiningroyaltiesintheTerritoryaregenerallypayableunderaprofit-basedschemesetoutintheMineral Royalty Act.Onshorepetroleumroyaltyispayablebasedonthevalueofthepetroleumatthepointofextraction.

WithonlyasmallnumberofminersintheTerritory,materialchangestotheprofitabilityofasingleminercanhaveasignificanteffectonminingroyaltyreceipts.Accordingly,forecastingroyaltyreceiptsisreliantonadvicefromminingcompaniesandpetroleumproducersofestimatedliabilityandcommoditypricemovements,productionlevelsandthevalueoftheAustraliandollar.

5.3 Own-sourcerevenuestabilityInaggregate,theTerritory’sown-sourcerevenuescanbechallengingtoforecastaccurately,largelyasaresultofthevariabilityofconveyancedutyandroyalties,whichmakesitdifficultfortheGovernmenttobudgetandplanforthefuture.Althoughpayrolltaxisacomparativelystablesourceofrevenue,evensmallpercentagechangescanhaveasignificantimpactontotalrevenues,aspayrolltaxisthelargestcontributortoown-sourcerevenue.

Chart5.2:VariationsingrowthofTerritoryown-sourcerevenuecomponentsovertime


5.4 Interstate comparisonsInterstatecomparisonsoftaxarrangements,includingthoseundertakenbytheCommonwealthGrantsCommission(CGC),PitcherPartnersandtheInstituteofPublicAffairs(IPA),haveoftenshownthattheTerritoryisthelowestorsecondlowesttaxingjurisdiction.

ThisisparticularlytrueforrecurrentbusinesstaxesbecausetheTerritoryistheonlyjurisdictionthatdoesnotimposealandtax.Althoughthismaybeanattractivearrangementformanybusinesses,itisunlikelytoencouragebusinessestomovetheirheadofficestotheTerritory.

-50-40-30-20-10

010203040%

Total taxation

Chan

ge fr

om p

revi

ous y

ear

Payroll tax Conveyance dutyYear ended June

Royalties

135%83%

08 09 10 11 12 13 14 15 16 17 08 09 10 11 12 13 14 15 16 17 08 09 10 11 12 13 14 15 16 17 08 09 10 11 12 13 14 15 16 17

November 2017 | 15

5.4.1 Taxation as a percentage of gross state productTaxationasapercentageofGSPisonewaytomeasurethegrossamountoftaxrevenuecollectedbyajurisdictioncomparedtothesizeofthatjurisdiction’seconomy.Basedon2015-16data(thelatestavailable),theTerritoryhadthelowesttaxtoGSPratioinAustralia.ThisissetoutinTable5.2.

Table5.2:TaxationasapercentageofGSP

JurisdictionTaxationasapercentage ofGSP(2015-16) Rank

NewSouthWales 5.5% 8

Victoria 5.3% 7

SouthAustralia 4.4% 6

AustralianCapitalTerritory 4.3% 5

Tasmania 4.1% 4

Queensland 4.0% 3

WesternAustralia 3.8% 2

Northern Territory 2.6% 1

Source:ABS,DepartmentofTreasuryandFinance

TherearesomelimitationswhencomparingtaxationasapercentageofGSP.IntheTerritory,somesectors(inparticular,theprocessingandexportofnaturalgasfromoffshorefields)contributeheavilytoGSPbutarenotdirectlysubjecttoTerritorytaxation(inthecaseofoffshoregas,thisistaxedbytheCommonwealth).ThispartlyexplainstheTerritory’slowtaxationtoGSPratio.

5.4.2 Taxation per capitaTaxationpercapitaisameasurethatcomparestaxationreceiptswithajurisdiction’spopulation.Itprovidesausefulindicationoftheoverallleveloftaxation.However,itdoesnottakeintoaccountthedistributionofwhopaystax.Onthismeasure,assetoutinTable 5.3,theTerritoryhadthesecondlowesttaxpercapitaratioin2015-16(thelatestavailabledata).

Table5.3:Taxationpercapita(2015-16)

Jurisdiction $ per capita Rank

AustralianCapitalTerritory 3919 8

NewSouthWales 3 880 7

WesternAustralia 3526 6

Victoria 3 280 5

Queensland 2605 4

SouthAustralia 2592 3

Northern Territory 2478 2

Tasmania 2 068 1

Allstates 3290

Source:ABS,DepartmentofTreasuryandFinance


5.4.3 Commonwealth Grants Commission tax effort ratiosTheCGCassesseseachstate’srevenue-raisingeffortonanannualbasis.RevenueeffortistheratiooftheactualamountofrevenueastateraisestotheamountoftaxrevenuetheCGCassessescouldberaisedifthestateappliednationalaveragetaxratestoitstaxbase.

Underthisassessment,theTerritoryhasthelowesttotaltaxationeffort.Table5.4reflectsthisassessment.

Table5.4:CommonwealthGrantCommissionassessmentsofrevenueeffort(2017UpdateReport)

NSW Vic Qld WA SA Tas ACT NT NT Rank

Miningrevenue 100.8 47.7 105.6 99.0 81.0 56.2 n/a 129.2 7

Payroll tax 101.8 100.9 91.1 106.0 87.1 106.3 132.2 106.9 7

Stamp duty 100.0 104.9 86.7 113.1 105.8 88.7 88.9 105.0 6

Insurance tax 110.5 95.9 77.8 115.7 116.6 113.2 29.0 77.6 2

Motortaxes 121.2 81.3 104.4 100.2 80.5 72.9 111.0 65.5 1

Land tax 80.2 114.1 96.5 116.9 138.9 115.7 182.5 0.0 1

Total tax revenue 105.1 101.2 87.7 102.2 102.6 90.2 101.7 85.4 1

Total revenue 97.5 95.3 105.8 103.0 99.8 83.2 152.0 95.2 2

Source:CGC2017Update

5.4.4 Business tax costs modelsComparisonsofstateandterritorytaxesareundertakenbyarangeoffirms,peakbodiesandpolicyinstitutes.AcomparisonofstatetaxesbasedonthemethodologyoftworeasonablyrecentstatetaxmodelsindicatesthattheTerritorygenerallyhasthelowestbusinesstaxcosts.

Pitcher PartnersThePitcherPartners'StateTaxReview2014-15comparedtaxespayableandothercostsbysmalltomedium-sizedcompaniesineachstate.TheNorthernTerritory,AustralianCapitalTerritoryandTasmaniawerenotincludedintheoriginalanalysis.However,usingPitcherPartners'methodologyandupdatingitwith2017-18data,theanalysis(setoutinTable5.5)showsthattheTerritoryisgenerallyalowtaxingjurisdiction.

Table5.5:BusinesstaxationcostsusingPitcherPartners'StateTaxReviewmethodology(2017-18)

Scenario1:Businesswithpayrollsize$1225564 Scenario2:Businesswithpayrollsize$6010000Aggregatetaxesandcharges(purchaseof

property)Aggregatetaxesandcharges(renting)

Aggregatetaxesandcharges(purchaseof

property)Aggregatetaxesandcharges(renting)

State Total($) Rank Total($) Rank Total($) Rank Total($) Rank

NSW 175061 6 43076 4 1148548 6 370 810 3

VIC 142920 4 44717 5 884593 3 337 620 1

QLD 113 618 3 22 162 1 915890 4 357595 2

SA 75155 1 54864 6 569740 1 384990 4

WA 150678 5 41471 3 1045541 5 409203 5

NT 80 306 2 23 286 2 773572 2 424253 6


November 2017 | 17

Inallscenariosbutone,theTerritoryisthesecondlowestbusinesstaxingjurisdiction(withtheexceptionoflargerbusinessesthatchoosetorentratherthanpurchasetheirpremises).ThislargelyreflectsthattheTerritorydoesnotimposealandtax.

Forasmallbusiness(scenario1),Territorytaxislowerbecauseabusinesswithapayrolloflessthan$1.5millionintheTerritorywouldbeexemptfrompayingpayrolltax.ThisisduetotheTerritory'srelativelyhighpayrolltaxtax-freethresholdcomparedtomostotherstates.

Foralargerbusiness(scenario2),theTerritoryrankedsecondforbusinessespurchasingtheirpremiseslargelyduetothefactlandtaxisnotimposed.ThisisoffsetbytherelativelyhighpayrolltaxpayablebyabusinessofthissizeintheTerritory.

Institute of Public Affairs (IPA)TheIPABusinessBearingtheBurden2012reportcomparedthetaxationcostsassociatedwithrunningarangeofbusinesssizesineachstate.ArangeofbusinesssizesareusedbasedontheparametersoftheWorldBank’sstandardcasestudycompany.

Table5.6:BusinesstaxationcostsusingIPABusinessBearingtheBurden2012methodology(2017-18)

Business size1

10% 50% 100% 200%Taxpaid($) Ranking Taxpaid($) Ranking Taxpaid($) Ranking Taxpaid($) Ranking

NSW 4201 7 117501 8 284561 8 622 222 7

Vic 2 027 3 97292 3 231 311 2 518545 1

Qld 3 032 6 98047 4 264048 4 546381 3

WA 1407 2 104591 6 272468 5 607651 5

SA 2572 4 109396 7 276993 6 615183 6

Tas 4988 8 100274 5 280 210 7 640083 8

ACT 2691 5 39638 1 216698 1 571226 4

NT 1 171 1 65568 2 234261 3 544500 2

Average 2 761 91538 257569 583224

1 Compared to World Bank case study company.Source:DepartmentofTreasuryandFinance

UsingtheIPAmethodologyfor2017-18,theTerritoryhasabelowaveragetaxpayableforeachbusiness.ThisisconsistentwiththeresultsusingthePitcherPartners'methodology,discussedabove.


6 Payroll tax

6.1 PayrolltaxoverviewPayrolltaxisthemostsignificantsourceofTerritoryown-sourcetaxrevenue.In2016-17,Territorypayrolltaxrevenuewasabout$313million,orabout40 percentofown-sourcetaxandroyaltyrevenue.AsdiscussedinChapter5,itisalsooneofthemoreefficientandstabletaxes,althoughitcanbeheavilyinfluencedbymajorprojects.

PayrolltaxispayableintheTerritorywhenthetotalannualAustralianwagesofanemployerexceedstheTerritory’s$1.5milliontax-freethresholdamount.Thethresholdreducesproportionatelyifanemployerpayswagesinanotherstateorterritory.

Thethresholdamountisadeductionfromtaxablewages,whichoperatessobusinesseswithtotalAustralianwagesofupto$1.5millioninafinancialyeardonotpayanypayrolltax.

Thedeductionreducesby$1forevery$4inwagespaidbyanemployerabovethe$1.5millionthreshold.Thismeansanemployerwhopayswagesof$7.5millionormoredoesnotreceiveadeductionandpaystaxbasedontheirtotaltaxablewages.

Afterapplyingthededuction,payrolltaxiscalculatedattherateof5.5percentontaxablewagespaidbyanemployerforservicesrenderedbyemployeesintheTerritory.Payrolltaxisgenerallypaidmonthlyandcalculatedbasedonwagespaidinthepreviousmonth.

Payrolltaxappliestomostemployeeremunerationincludingwagesandsalaries,commissions,bonuses,allowances,employer-fundedsuperannuationbenefits,terminationpayments,mostleavepaymentsandthegrossed-upvalueoffringebenefits.

In2009,theTerritoryintroducedpayrolltaxlegislationharmonisedwiththatofmostotherstatesandtheAustralianCapitalTerritory.Asaresult,payrolltaxlegislationinterstatehasthesamerules.ThiswasdonetosimplifyadministrationandcomplianceandsignificantlyreduceredtapeforbusinessesoperatingintheTerritoryandotherjurisdictions.However,taxratesandthresholdsstilldifferbetweenjurisdictions.

• PayrolltaxisthelargestsourceofTerritoryown-sourcerevenue.

• PayrolltaxisthemoststableandpredictableTerritorytax,althoughitcanvarywiththecommencementandendoflargeprojects.

• Payrolltaxhaseconomicimpactssimilartoconsumptiontaxes,isanefficienttax,andhasrulesthatarelargelyharmonisedwiththeotherstates.

• Territorypayrolltaxhasahightax-freethresholdthatensuresmostlocalbusinessesdonotpaypayrolltax,coupledwitharelativelyhightaxrate.

• Reformstopayrolltaxmayfocusonrateandthresholdchanges,andshouldbalancetheinterestsofTerritorybusinesseswiththeimportanceofpayrolltaxasarevenuesource.

November 2017 | 19

6.2 WhopayspayrolltaxintheNorthernTerritory?ThepayrolltaxpolicysettingintheTerritoryisahightax-freethresholdthatmeansthemajorityofsmalllocalTerritorybusinessesdonothavetoregisterfororpaypayrolltax.Italsosignificantlyreducesthetaxpayablebyslightlylargerlocalbusinesses.

Payrolltaxisimposedonemployers.Althoughpayrolltaxisoftenregardedasa‘taxonjobs’andadisincentivetoemploy,studiesindicatethatpayrolltaxeshavesimilareconomicconsequencestoconsumptiontaxessuchastheGST,andgenerallydonotresultinlowerprofitsforbusinesses.

PayrolltaxisgenerallyseenasanefficientsourceofTerritoryrevenue,withrevenuegrowthwhenwagesandemploymentgrow.

6.2.1 Tax-free thresholdTheTerritory’shightax-freethresholdmeansthetaxbaseissmallerandahighertaxrateisrequiredtoachievethedesiredrevenueoutcome.Largerbusinesseswillhaveapayrolltaxliabilitywhileothers,includingsmallermarketcompetitors,willnot.Someemployerswithtaxablewagesclosetothe$1.5millionthresholdmayalsoperceivepayrolltaxasadisincentivetoengagingadditionalemployees.However,payrolltaxisonlypayableonthetaxablewagesthatexceedthetax-freethreshold.

ItisalsoimportanttorecognisethatTerritorytaxesareonlyareasonablysmallproportionofoverallbusinesscosts.Businessesconsiderallcostsarisingfromstartingorexpandingabusinessanddonotbasetheirlocationdecisionssolelyontaxconsiderations.

Table6.1showstheeffectoftheTerritory’s$1.5milliontax-freethreshold,withabout2400employersregisteredforpayrolltaxintheTerritory,comparedtoatotalof14300businessesoperatingintheTerritory.

Table6.1:PayrolltaxpayingbusinessescomparedtototalTerritorybusinesses

Number

EmployersregisteredtopayTerritorypayrolltax(30June2016) 2471

EmployingbusinessesintheTerritory(ABSestimate) 5854

TotalbusinessesoperatingintheTerritory(ABSestimate) 14 310

Source:ABSCat.No.8165.0CountsofAustralianBusinesses,includingEntriesandExits,June2012toJune2016

Table6.2demonstratesmostbusinessesthatpayTerritorypayrolltaxarelargenationalorinternationalcompanieswithwagesinexcessof$7.5million.Incontrast,only383(about15percent)ofpayrolltax-payingbusinessesareTerritoryfirms.

Table6.2:Businessespayingpayrolltax(30June2016)

Annualwages Interstate Local Total

<$7.5M 413 259 672

>$7.5M 1675 124 1799

Total 2 088 383 2471



6.2.2 ExemptionsWagespaidbymostnon-profitorganisationsrunforacharitablepurpose,religiousorpublicbenevolentinstitutions,someschoolsandeducationproviders,andhealthserviceprovidersareexemptfrompayrolltax.Exemptionsarealsoprovidedtobusinessesinrespectofwagespaidtoemployeesonmaternity,paternityandadoptionleaveorwhenvolunteeringasfirefightersandemergencyservicevolunteers.AsmostTerritorybusinessesarenotsubjecttopayrolltax,payrolltaxexemptionsprimarilybenefitlargeinterstateemployers.

6.3 Interstate comparisonTables6.3and6.4setoutacomparisonofthetaxratesandtax-freethresholdsofstatesandterritories,withTable6.4providingtheeffectivepayrolltaxrateatvariouswagelevelsforeachjurisdictionafterconsideringindividualstatethresholdsandtaxrates.

AsaresultoftheNorthernTerritory’shighthresholdandaveragepayrolltaxrate,theTerritoryimposeslowerthanaveragepayrolltaxesuptoabout$3millioninwages.However,forbusinesseswithabout$4millionormoreinwages,theTerritory’spayrolltaxschemehasaneffectivetaxrateabovethenationalaverage.

Table6.3:Stateandterritorypayrolltaxratesandannualthresholds

NSW Vic1 Qld2 WA3 SA4 Tas ACT NT3 Average

Threshold($M) 0.75 0.63 1.10 0.85 0.60 1.25 2.00 1.50 1.08

Rate(%) 5.45 4.85 4.75 5.50 4.95 6.10 6.85 5.50 5.49

1Arateof3.65 per centappliesforregionalVictorianemployers.2 Thresholdreducesaswagesincrease,sonoexemptionisprovidedforemployerswithwagesover$5.5million.3 Thresholdreducesaswagesincrease,sonoexemptionisprovidedforemployerswithwagesover$7.5million.4 Lowerrateof2.50 per centappliesforwagesfrom$0.6Mto$1Mandtherategraduallyincreasesto4.95 per centforwagesbetween$1Mand$1.5M.

Source:Statelegislationandinformationavailableat31October2017

Table6.4:Effectivestateandterritorypayrolltaxratesatvariouswagelevels

Wages$M

NSW%

Vic%

Qld%

WA%

SA1

%Tas%

ACT%

NT%

Average%

1 1.36 1.82 0.00 0.93 1.98 0.00 0.00 0.00 0.76

2 3.41 3.33 2.67 3.57 3.47 2.29 0.00 1.72 2.56

3 4.09 3.84 3.76 4.45 3.96 3.56 2.28 3.44 3.67

4 4.43 4.09 4.30 4.88 4.21 4.19 3.43 4.30 4.23

5 4.63 4.24 4.63 5.15 4.36 4.58 4.11 4.81 4.56

10 5.04 4.55 4.75 5.50 4.65 5.34 5.48 5.50 5.10

20 5.25 4.70 4.75 5.50 4.80 5.72 6.17 5.50 5.30

1Notincludingthesmallbusinesspayrolltaxrebateprovidedtoeligibleemployerswithpayrollsupto$1.2million.Source:Statelegislationandinformationavailableat31October2017

November 2017 | 21

6.4 EmploymentincentivesSomestatesprovide,orhavepreviouslyprovided,short-termemploymentincentiveschemesthrough,orlinkedto,theirpayrolltaxschemes.AcurrentexampleistheNSWJobsActionPlan,whichprovidesapayrolltaxrebateforbusinesseswith50orlessfull-timeequivalent(FTE)employeesforeachpersonemployedinanewjobforaminimumoftwoyears.Othersimilarprogramshavevariouslytargetedincreasingemploymentbasedon:

• employersize,thatis,generallysmallerormediumbusinesses

• employerlocation,suchasregionalorremoteemployers,oremployersinareaswithhighlocalunemployment

• targetedemployees,suchaslong-termunemployed,retrenchedpersons,apprentices,youngpersons,residents(ratherthanFIFOemployees)andAboriginalemployees.

Asidefromtherangeoftheseschemes,thetaxsystemisgenerallynotconsideredthemosteffectivemechanismtoachieveemploymentobjectivesasitcannotaccuratelytargetgovernmentassistancetoparticulargroupsoractivitieswithoutaddingsignificantredtaperequirements.

Also,onlyasmallproportionofemployerspaypayrolltax,especiallyintheTerritorywherethemajorityoflocally-establishedbusinessesarenotsubjecttopayrolltax.Therefore,taxincentivesprovidenobenefittothesesmalleremployers.

Taxconcessionsmaydistorttheintendedoutcomeifanemployerhiresbasedonlocalityratherthanbusinessefficiencyordismissesalong-servingemployeetoreceiveorretainaconcessionprovidedforaneweremployee.

6.5 PotentialreformoptionsGiventhedesirabilityofmaintainingharmonisedpayrolltaxlegislationacrossthestates,thekeyreformoptionsavailableareeitheralterationstothepayrolltaxrateof5.5percentorthe$1.5milliontax-freethreshold.

TheGovernmentisinterestedindiscussingwhatisrequiredtoensuretheTerritorypayrolltaxschemeiseffectiveandsupportiveofTerritorybusinesses,balancedwithitbeingaveryimportantrevenuesource.Thisincludessubmissionsinrespectoftheappropriatenessofthecurrentpolicysettingofahightax-freethresholdtoreducetheimpactofpayrolltaxonlocalbusinesses,balancedwitharelativelyhigherpayrolltaxrate.

Adjusting the payroll tax rateIntermsoffiscalimpact,each0.1percentchangeinthepayrolltaxratewouldleadtoa$5to6 million per annum changeintotalrevenue.

Adjusting the tax-free threshold Areformoptionmayincludeloweringthetax-freethresholdsoanumberofsmallerbusinessescommencepayingpayrolltax.Itisestimatedthatloweringthetax-freethresholdto$1millionwouldraiseabout$11million,whileloweringthethresholdto$600000(equaltoSouthAustralia’sthreshold,thelowestinAustralia)wouldraiseadditionalrevenueofabout$24 million.Thesewouldleadtoabout150to450additionalemployers,respectively,payingpayrolltaxcomparedtothecurrent2500registeredemployers.


Incomparison,increasingthetax-freethresholdwouldreducethenumberofemployersthatpaypayrolltaxatthecostofareductioninpayrolltaxrevenue.However,theindividualsavingsforeachbusinesswouldbemoderate.Thecostofincreasingthethresholdto$1.75millionwouldbeabout$4millionperannumandthecostofraisingthethresholdto$2millionwouldbeabout$7millionperannum.Thesethresholdincreaseswouldonlyremove50to100employersfromthetax base.

Introduce new employee incentivesPayrolltaxconcessionsorrebatescouldbeprovidedforemployersthatemployworkersinnewjobsforaminimumperiodoftime(forexample,atleasttwoyears)ortargetedatparticularcategoriesofemployeroremployee.Forexample,payrolltaxincentivescouldbedesignedtoencourageemploymentoflocalworkersratherthaninterstateorFIFOarrangementsinordertobenefittheTerritoryandregionaleconomies,althoughitmayincuradditionaltaxforbusinesses.

However,ingeneral,theremaybelimitationstotheeffectivenessandefficiencyofpayrolltaxemployeeincentiveschemes.Anysuchincentiveneedstocarefullyconsiderwhetherthetaxsystemisthemostappropriatemethodfordeliveringassistance.

Reduce exemptionsPayrolltaxexemptionsforcertainorganisationsortypesofemployeesresultinrevenueforgoneofabout $30 million.

Removingexemptionsmightincreasethesimplicity,efficiencyandequityofthepayrolltaxsystem,aswellasprovidingasignificantadditionalsourceofrevenuefortheTerritory.However,asthebulkoftheseexemptionsareprovidedtocharitableorganisations,removingtheexemptionsmaybeinconsistentwithgovernmentandcommunityobjectives.

Ontheotherhand,thereisacasetobemadethattheprovisionofassistanceisalwaysmoreefficientlyprovidedthroughagrantandpaymentframework,ratherthantaxconcessions.First,thisrecognisesthattaxconcessionsprovidenoassistancetosmallerorganisationsbelowthetax-freethresholdorthosemainlyrelyingonvolunteers.Italsoallowsagovernmenttobettertargetparticulartypesofcharitiesorensuretheefficientallocationofresources.

Discussion questionsQ6.1 Arethecurrentbroadpolicysettingsforpayrolltax,focussedonahightax-free

thresholdtominimisetheliabilityofsmallerlocalbusinesses,appropriate?

Q6.2 Shouldadjustmentsbemadetothepayrolltaxrateorthreshold?Whatrevenueneutraloptionscouldbepursued,suchasloweringthethresholdinordertolowerthepayrolltaxrate?

Q6.3 DoesthecurrentpayrolltaxsystemencouragebusinessestoemploylocalworkersratherthanFIFOworkers?Shouldit?Ifso,how?

Q6.4 Whatotherimprovementstothepayrolltaxsystemcouldbeconsidered?

Q6.5 IfadjustmentstothepayrolltaxsystemwouldreducetherevenuereceivedbyGovernment,whatmeasuresshouldbetakentocompensate?

November 2017 | 23

7 Property taxes

7.1 ConveyancedutyoverviewIn2016-17,theTerritorycollected$105millioninconveyanceduty,orabout14percentofown-sourcetaxandroyaltyrevenue.

ConveyancedutyisderivedfromdirectandindirecttransfersofdutiablepropertyintheTerritory.Dutiablepropertyisrealestate(land,buildingsandotherfixtures),miningtenementsincludingexplorationrights,andbusinessassetsincludingplantandequipment,intellectualproperty,statutorylicencesandgoodwill.

DutyintheTerritoryiscalculatedbyaprogressiverateonthewholevalueoftheproperty.Forpropertywithadutiablevalueof:

• lessthan$525000,therateisdeterminedbyaformulathatrangesfromaminimumof1.5to4.95percent

• between$525000andlessthan$3million,therateis4.95percent

• between$3millionand$5million,therateis5.75percent

• $5millionormore,therateis5.95percent.

Arangeofexemptionsfromconveyancedutyalsoapplyandconcessionsareavailableforfirsthomebuyers,seniorsandNorthernTerritoryPensionerandCarerConcessioncardholdersandfornewlybuiltprincipalplacesofresidence.

7.2 ConveyancedutycollectionsConveyancedutycollectionsareaffectedbybothpropertyvaluesandtransactionvolumes,whichcanvaryfromyeartoyearandresultinvolatility.Forexample,significantdutycanresultfromasmallnumberofverylargecommercialtransactionsinasingleyear.

• ConveyancestampdutytaxisanimportantTerritoryown-sourcerevenue.

• Stampdutyisdifficulttoforecastaccuratelyasitisaffectedbypropertypricesandsalevolumes,aswellaslargecommercialtransactionsinanotherwisesmallmarket.

• Annualpropertytaxesaregenerallyregardedasastableandeffectivetaxbase.However,annuallandtaxesinotherstatesarenotasefficientastheycouldbe.


Chart7.1:Territorydutycollectionsandtransactionvolumesatselectedvalueranges(2016-17)

Note:Excludesduty-exempttransactions.Source:DepartmentofTreasuryandFinance

AsdetailedinChart7.1,althoughtherearemanytransactionsforpropertiesvaluedbelow$400000,relativelylittlestampdutyiscollectedduetothecombinationoflowerpropertyvaluesandlowerdutyrates.Atvaluesof$400000to$600000,substantialdutyiscollectedbothduetohighervaluesandvolumes,asthisvaluerangecorrespondstotheDarwinmedianhouseprice.Incontrast,therearefarfewertransactionswithavalueof$1millionormorebutsignificantdutyiscollectedduetohighervaluesanddutyrates.

7.3 ConveyancedutydesignissuesAsatransaction-basedtax,conveyancedutyhasbeencriticisedbecauseitaddstothecostoftransfersandcanpotentiallydelayorpreventtransactionsfromoccurring.

Asatransactionaltax,stampdutyimposesahigherlevelofoveralltaxationonindividualswhotransferpropertymorefrequently.StampdutyispartlymitigatedintheTerritorybyanumberofhomebuyerconcessionsandexemptionsforcorporatereconstructionstoassistwithbusinessrestructures.Dutyreliefisalsoprovidedtofirsthomebuyerstoensurestampdutydoesnotdetertheirentryintothehousingmarket.Furtherdetailsontheseconcessionsareprovidedlaterinthischapter.

Stampduty,inthatitincreasespurchasecosts,isonlyonefactoraffectingadecisiontopurchaseproperty.Otherfactorsincludeeconomicconditions,suchasemploymentopportunities,rentalorbusinessinvestmentreturns,andpersonalfactors,suchasthelocationoffamilyandtheavailabilityofhealth,educationandrecreationalservices.

Stampdutyalsohassomedesignbenefits.Stampdutyisonlypaidwhenpropertyispurchased,meaningthetimingofthetaxliabilitywillgenerallyalignwithataxpayer’sabilitytopay(thatis,whenthetaxpayerhasenoughfundstobuytheproperty),orbecapitalisedintoamortgage.Incomparison,recurrentpropertytaxesmaybelesssensitivetothetaxpayer’scapacitytopay.

Stampdutymayalsoimprovemarketstabilitybyaddingtransactioncostsandincreasingthecapitalgainsrequiredbeforeprofitscanbemadeonpropertyinvestment,whichmaydampenspeculativeinvestmentactivity.Aspropertyvaluesandinvestmentdecisionsareaffectedbyawiderangeofvariables,itisdifficulttoevaluatestampduty’seffectonmarketdemand.Somestateshavenonethelessintroducedspecificduties,particularlysurchargesonforeignbuyers,toattempttoaffectdemand-sidemarketconditions.

0246810121416$M

0100200300400500600700Number

< 10

0

100-

200

200-

300

300-

400

400-

500

500-

600

600-

700

700-

800

800-

900

900-

1 00

0

1 00

0-3

000

3 00

0-5

000

5 00

0-10

000

10 0

00-2

0 00

0

20 0

00-3

0 00

0

30 0

00-5

0 00

0

> 50

000

Stam

p du

ty c

olle

cted

Tran

sacti

on v

olum

e

Property value ($000)Transaction volume (count) Stamp duty revenue ($)

November 2017 | 25

Table7.1Foreignbuyersurcharges

NSW VIC QLDSA

(1January2018)WA

(1January2019)

8% 7% 3% 4% 4%


TheTerritorydoesnotimposeadutysurchargeonforeignbuyersofresidentiallandandforeigninvestmentinresidentialpropertyintheTerritoryisextremelylimited.AlthoughadutysurchargecouldbeimposedonforeignbuyersintheTerritory,itisunlikelytohaveanymaterialeffectonTerritoryrevenuesorrealestatemarketactivity.

7.4 StampdutyeffortintheTerritory–interstatecomparisonTheTerritoryhasrelativelyhighstampdutyrateswhencomparedtomoststates,otherthanVictoria.However,thereisnoannualpropertyorlandtaxintheTerritory.

Somestateshavedifferentdutyratesforcommercialtransactions.InSouthAustraliaandtheAustralianCapitalTerritory,thisreflectsabroaderreformagendatoexemptcommercialtransactionsfromstampduty.

TheTerritorychargescomparativelyhighstampdutyratesoverall,butthesizeofthedifferenceintaxratesvarieswithpropertyvalues.TheTerritory’staxonmedian-valueresidentialpropertiesiscomparativelymuchhigherthantheratesimposedinterstate.Thetaxonhigh-valuetransactionsisalsomorethanthestateaverage,particularlysincetaxrateswereincreasedfrom5.45toamaximumof5.95percenton1July2017.

TheTerritory’shighstampdutyrateissimilarlyreflectedinCommonwealthGrantCommission’s(CGC)assessmentsoftaxeffort.

Table7.2CGCassessedeffort–transferstampduty

NSW Vic Qld WA SA Tas ACT NT Average

2015-16 100.0 104.9 86.7 113.1 105.8 88.7 88.9 105.0 100.0

Source:CGC2017Update

7.5 Stamp duty home buyer concessionsTheeffectoftheTerritory'srelativelyhighstampdutyonTerritoryhomebuyersispartlyoffsetbyanumberofhomeincentiveschemes.

ThelargestprogramistheFirstHomeOwnerDiscount,whichprovidesstampdutyassistanceforfirsthomebuyerswhopurchaseanestablishedhomeintheTerritoryuptothevalueof$650000.Itisafullstampdutyconcessionontheinitial$500000valueofthehome,whichequatestoastampdutysavingofupto$23928.60.

TheTerritoryalsoprovidesaSenior,PensionerandCarerConcession,whichisastampdutydiscountofupto$10000toseniors(aged60yearsorover)orholdersofaNorthernTerritoryPensionerandCarerConcessionCard,forthepurchaseofahomevaluedupto$750000,orvacantlandvaluedupto$385000.

Finally,theTerritoryprovidesaPrincipalPlaceofResidenceRebate,whichisa$7000stampdutyconcessionfornon-firsthomebuyerswhopurchaseorbuildanewhome.


Althoughnotataxconcession,theTerritoryalsoprovidesaFirstHomeOwnerGrantof$26000forfirsthomebuyersthatpurchaseorconstructanewhome.

Togetherthesestampdutyconcessions(andgrant)provideassistanceandresultinrevenueforgone,ofover$24millionperannum,whichissetoutinTable7.3.

Table7.3Homebuyerstampdutyconcessionsandotherincentives

Concession typeAnnualrevenueforgone

$M

FirstHomeOwnerDiscount 13.2

Senior,PensionerandCarerConcession 0.6

PrincipalPlaceofResidenceRebate 0.3

FirstHomeOwnerGrant 10.0

Total cost 24.1


7.6 PotentialstampdutyreformoptionsIncrease stamp duty ratesAnincreaseinstampdutyrateswouldgenerategreaterGovernmentrevenuesandfundgovernmentservicedelivery.

AnyconsiderationofraisingstampdutyratesshouldtakeintoaccounttheTerritory’srelativelyhighstampdutyrateswhencomparedtothenationalaverage.

Nonetheless,theTerritory’soveralltaxationbaseislimitedandintheabsenceofanalternativeformoftaxation,increasingstampdutyrates(orreducingconcessions)isoneofthefewoptionsavailabletoGovernmenttoraiseadditionalrevenue.

Reform/reduce stamp duty ratesStampdutyisaprogressivetax,withratesincreasingasthevalueofthepropertybeingtransferredincreases.Otherthanatverylowvalueranges,theTerritory’sstampdutyrateishighwhencompared to stamp duty rates interstate.

Onereformoptionistoreducetaxrates.ThiscouldgenerallyimprovetheefficiencyoftheTerritory’staxationsystembutwouldresultinsubstantialreductionsinrevenue.

Chart7.2andTable7.4illustratetheeffectonTerritoryrevenuefromaligningtheTerritory’sdutyrateswiththelowerdutyratesintheAustralianCapitalTerritory,orbyadoptingtheaverageofduty rates imposed interstate.

November 2017 | 27

Chart7.2ComparisonofNorthernTerritory,AustralianCapitalTerritoryandstateaverageresidentialstampdutyrates


Table7.4Revenueeffectofloweringdutyrates(excludingeffectsofhomebuyerconcessions)

NT duty rates Stateaveragedutyrates ACTdutyrates

Averageoveralldutyrate(%) 4.83 4.24 3.60

Revenue($M) 113 99 84

Cost($M) – -14 -29


ReducingtheTerritory’sstampdutyratetobeclosertothestateaveragewouldcosttheTerritoryover$14millionperannumandwouldrequireadditionalrevenuefromothersourcesifgovernmentservices are not to be reduced.

Abolition of duty on non-land business propertyFollowingtheintroductionoftheGSTin2000,thegovernmentatthetimecommitted,aspartoftaxreformagreedwiththeCommonwealth,toabolishstampdutyonnon-landbusinessassetssuchasgoodwillandlicences.However,asbusinesspropertycomprisesarelativelysignificantcomponentofTerritorydutiableproperty,thiscommitmenthasbeendelayeduntilBudgetcircumstancesimprovesufficientlytofundthatcommitment.Allstates,otherthantheTerritory,QueenslandandWesternAustralia,havenowabolishedthesetaxes.

Abolitionofthiscomponentofstampdutyisestimatedtocostabout$10millionperannum.TheGovernmentisinterestedinhearingviews,andreceivingevidenceastotheextenttowhichdutyonnon-landpropertyisconsideredanobstacletobusinessdecisionsaboutexpansionorinvestment.

Reform of landholder legislative schemeOneofthemorecomplexaspectsofstampdutyistheimpositionofdutyonchangesincontrolovercompaniesandtruststhatownland.Thisensuresequitybetweenindividualswhoownlandinacompanyortruststructureandindividualswhoholdlanddirectly,andalsoensuresstampdutycannotbeavoidedbyholdingpropertyincompaniesortrusts.

However,ascompanyandtruststructurescanbeextremelycomplex,particularlywhereforeigncorporationsareinvolved,thestampdutylandholderlegislationisverytechnical,makingitchallengingforbothtaxpayersandgovernmenttoapply.

100 200 300 400 500 750 1000 3000 5000$000

ACTNT State average

0

1

2

3

4

5

6

7%


Althoughsomeofthiscomplexityisunavoidable,thecurrentlegislationcouldpossiblybereformedto make it easier to understand and apply.

Governmentisinterestedinwhetherindustryconsidersthistobeapriorityareaforreform.

Reform of corporate reconstruction exemptionsDutyexemptionsexisttoallowforcorporatereconstructionstoallowfortransfersofpropertywithincorporategroupsandfacilitatebusinessrestructures.However,toensuretheseprovisionsarenotexploitedfortaxavoidance,thecurrentprovisionsarerelativelytechnicalandhavearangeofspecificcriteriathatmustapplybeforetheconcessionisapplied.

Theseprovisionscouldbeexpandedtoallowforabroaderrangeoftransactionstobeexempted.Forexample,theprovisionscurrentlydonotapplytoassetsheldinunittruststructures.However,ascorporatereconstructionsarerelativelyrare,viewsaresoughtastowhethersuchreformswouldbeusefulinpracticeorareapriority.

7.7 AnnualpropertytaxesAnalternativetostampdutyisanannualtaxonlandownership.Arecurrentlandtaxisgenerallychargedontheunimprovedvalueoftheland(thatis,thelandvalueexcludingbuildingsandimprovements),andisnotdependentontransactionsinvolvingtheland.Recurrenttaxesonlandareregardedasefficientbecauselandisvaluableandimmobile,meaningthetaxcannotbeavoidedbychangesinthebehaviourofthelandowner.Previoustaxationreformreviewsinterstatehavenotedoveralleconomicefficiencycouldbeimprovedifstatesandterritoriesweretofocusonbroad-basedrecurrenttaxesonland.

Recurrentpropertytaxesincreasethecostsofowningland.Thiscanencouragelandlordstodevelopandutiliselandtowardsitsbesteconomicuse,anddiscouragepracticessuchaslandbanking.Taxesonunimprovedlandvaluesarealsodesirablefromarevenuestabilityperspective,asunimprovedlandvaluesarenotreliantonthestateoftherealestatemarket,thatis,priceandsalesvolumes.

OtherthantheTerritory,allstatesandtheAustralianCapitalTerritoryhavesomeformofrecurrentpropertytaxinadditiontolocalgovernmentrates,generallycalledalandtax.TheTerritorydoesnotimposeanykindoflandtax.

Althoughpropertytaxesaresaidtobeefficient,thelandtaxescurrentlyinplaceinotherstatessufferdesigninefficiencies,suchas:

• taxfreethresholdsthatexcludelowervaluelandholdingsfromthetaxbase

• significantexemptionsforparticularlanduses,specificallyprincipalplaceofresidence(forexample,thefamilyhome)andfarmingland,whichremovealargeportionoftheresidentiallandbaseandhighvaluelandholdingsfromthelandtaxbase

• progressiveratestructures,wheremorevaluablelandistaxedatahigherrate,whichmeanspropertyholdingsneedtobeaggregatedtoassessowners’liabilitytotax.Suchaggregationisadministrativelycomplexandcostlyandcancauseanincentiveforownerstoholdtheirlandindifferentformsofownershipvehiclesinanattempttoreducetheirlandtaxliability.

Incontrast,localgovernmentsacrossAustraliaimposebroad-basedlandtaxesintheformoflocalgovernmentrates.Thesetaxesmostlydonothavetheaboveinefficienciesandareconsideredtobeamongthemostefficienttaxesagovernmentcanimpose.

November 2017 | 29

Othertypesofrecurrentpropertytaxationinterstateincludetheimpositionofvariousmiscellaneouslevies,feesandcharges.Thisincludesregionallevies,suchasemergencyservicesleviesormetropolitanparkinglevies,leviesonforeignownersofland,andleviesonvacantresidentialland.Therateoflandtaxvariessignificantlyineachjurisdiction,asillustratedinTable7.5.

Table7.5Summaryoflandtaxratesandthresholds

NSW VIC QLD WA SA TAS ACT

Fixedcomponent($) 100 275 500 300 – 50 –

Minimumthreshold($000) 549 250 600 300 353 25 –

Maximumthreshold($000) 3357 3 000 5000 11 000 1 176 350 275

Minimumrate(%) 1.60 0.20 1.00 0.25 0.50 0.55 0.41

Maximumrate(%) 2.00 2.25 1.75 2.67 3.70 1.50 1.23


Theamountofrevenuethatcanberaisedineachjurisdictionthroughalandtaxvariesaccordingtothetaxrateandthresholds,butisalsodependentontheamount,valueanduseoflandinthatjurisdiction.

Assessmentsofeachjurisdiction’slandtaxcapacityaremadeannuallybytheCGC.HavingregardtotheTerritory’spopulation,theTerritoryisassessedashavingbelowaveragelandtaxcapacity,butcouldraise$72millionannuallyifstateaveragepolicywasimposed.

7.8 Potentialreform–introduceanannualpropertytaxAnannualbroad-basedpropertytaxwithnotax-freethresholdsandalowtaxratewouldbeverysimilarto,andhavethesameincidenceas,localgovernmentrates.Duetotheirsimilarities,itispossiblethatexistinglocalgovernmentsystemscouldbeleveragedtoallowanannualpropertytaxtobeimplementedintheTerritorytominimiseadministrativecosts.

Intermsofpossiblerevenueraisedundersuchamodel,theunimprovedcapitalvalueofrateablelandintheDarwin,Palmerston,Litchfield,AliceSpringsandKatherinelocalgovernmentareasisabout$21billion.Atataxrateof0.5percent,whichisroughlyequivalenttothelevelofratesimposedbylocalgovernments,thiswouldraise$105million,broadlyequivalenttoTerritorystampdutyrevenuein2016-17.

Introductionofanannualpropertytaxwouldprovideadditionalrevenuethatcouldfundgovernmentservices.Itmayalsoprovideanopportunitytofundothertaxreform,suchasreducingconveyanceorinsurancestampduty.Othertaxreviews,suchastheAustralia’sFutureTaxSystemReview,haverecommendedthatamovetoreducestampdutiesfundedbyannualpropertytaxeswouldresultinimprovementsinstateandterritorytaxationsystems.

Table7.6setsoutindicativerevenue,theapproximateannualtaxpayablebyatypicalDarwinhomeandexamplesofothertaxreformthatcouldbefunded.


Table7.6Indicativerevenueandeffectofabroad-basedannualpropertytax

Property tax rate

Annualpropertytax revenue

Examplesofrevenue-neutralreformoptionsavailable(thatis,nooverallincreaseintaxrevenue)

Approximateannual tax1

0.1% $21M ReducetheTerritoryto‘stateaverage’conveyancedutyratesORReduceinsurancedutyratesbyhalf

$300

0.2% $42M ReduceTerritoryconveyancedutyratestoaflat3 per cent rateORAbolishinsuranceduty

$600

0.3% $63M ReduceTerritoryconveyancedutyratestoaflat3 per cent rateANDAbolishinsuranceduty

$900

0.4% $84M ReduceTerritoryconveyancedutyratestoaflat1 per cent rate

$1 200

0.5% $105M AbolishTerritoryconveyancestampduty $1500

1Propertywithaunimprovedcapitalvalue(UCV)of$300000andmarketvalueof$520000(thestampdutyforwhichwouldbe$25569)

Source:DepartmentofTreasuryandFinance,localgovernmentbudgetsandannualreports

Introducinganyannualchargeonpropertymaybedifficultforloworfixed-incomehomeownerstobudgetfor.Considerationmayneedtobegiventoassistanceforthesehouseholds,whichinturnwouldhaveaneffectonthelevelofrevenueraisedandmayincreasethecomplexityofthescheme.

Discussion questionsQ7.1 Arethecurrentbroadpolicysettingsforconveyancestampduties,focussedon

relativelyhighrateswithconcessionstoassisthomebuyers,appropriate?

Q7.2 Shouldadjustmentsbemadetotheconveyancestampdutyratesorthreshold?

Q7.3 Whatotherimprovementstothepropertytaxsystemcouldbeconsidered?

November 2017 | 31

8 Gamblingtaxes

8.1 GamblingtaxoverviewGamblingtaxesarethefourthlargestcontributortotheTerritory’sown-sourcerevenue.In2017-18,gamblingtaxrevenueisforecasttobe$78million,upfrom$72millionin2016-17.Thismainlycomprisescommunitygamingmachinetaxof$32million,communitybenefitlevyof$12million,lotterytaxof$23million,bookmakertaxof$5millionandcasinotaxesof$4million.

Generally,gamblingactivitiesaretaxedathighrates.Thisisbecausegamblingactivitiesareoftenrestrictedbyregulation,withfewersuppliersthaninnormalcompetitivemarkets.Asaresult,industryparticipantsfacerestrictedcompetitionfromwhichtheycanextracthigherprofits.Thesehigherprofitsarealsoknownasmonopolyprofitsoreconomicrent.

Taxesoneconomicrentaregenerallyregardedasbeingaveryefficientformoftaxation.However,determininganappropriateleveloftaxationischallengingduetotheneedtobalancetherevenuethatcanberaisedfromgamblingtaxeswiththeregulatoryrolegovernmentplaysinlimitingsocialharmfromproblemgambling.

Furthermore,giventhesocialcostsassociatedwithgambling,thereisastrongcommunityexpectationforgovernmentstocollectareasonableshareofprofits,intheformoftaxes,fromgamblingactivities.

Intermsoftaxpolicyprinciples,gamblingtaxesaresomewhatregressive.Thisisbecauselowincomeearnerstendtospendproportionatelymoreoftheirincomeongamblingactivitiesincludinglotteriesandgamingmachines.

Gamblingtaxesarereasonablystraightforwardtoadminister,withlimitedcompliancecostsforbusinessafterotherregulatorycompliancerequirementsarefactoredin.Despitethissimplicityandtherelativestabilityofgamblingtaxcollection,therearetax-baserisksinrelationtobookmakertax,whicharedetailedlaterinthischapter.

TheNorthernTerritory2015GamblingPrevalenceandWellbeingSurveybytheNorthernTerritoryGovernmentandMenziesSchoolofHealthResearchfoundthatTerritoryadultpopulationgamblingparticipationdeclinedsignificantlybetween2005and2015,otherthanonlinegamblingonracingandsports.Thismayindicatelimitedscopeforgrowthingamblingtaxrevenues.

• TheTerritoryimposesseveralkindsofgamblingtaxes,includinglotteries,electronicgamingmachinetaxes,bookmakertaxandcasinotaxes.

• Communitygamingmachinetaxespaidbyclubsandhotelswererecentlyincreasedinthe2017-18Budget.

• Bookmakertaxesmayshifttobeingbasedonthelocationofthepersonplacingthebet,dependingonthereformsinterstate.

• Duetoexistingcontractualagreementswithoperators,thereislimitedscopetoreformothergamblingtaxes,suchascasinotaxes,inthenearterm.


8.2 GamblingintheTerritoryGamblingintheTerritoryinvolvesElectronicGamingMachines(EGMs,colloquiallyknownaspokermachinesor‘pokies’),tablegamingincasinos,NTKenoandlotteries.Gamblingalsoincludesbetsplacedoneventssuchashorseracingorsportsbetting.

Pokies,tablegames,lotteries,andNTKenotypicallyphysicallytakeplaceintheTerritory,whilebettingonevents,andinparticularsportsbetting,canoccuronlinewiththebetsbeingplacedremotelybybothlocalandinterstatecustomers.TotheextenttheonlinebookmakersandbettingexchangecompaniesarelocatedintheTerritory,taxesarecurrentlypaidtotheTerritoryregardlessofwherethecustomersare.

8.3 TaxesoncommunitygamingmachinesCommunitygamingmachinetaxisamonthlytaxbasedonthegrossprofits,thatis,playerlosses,fromgamingmachinesinhotelsandclubs.ATerritorywide-caplimitsthetotalnumberofcommunitygamingmachinesto1852.Limitsinthenumberofgamingmachinesalsoapplyforeachvenue,being55forclubsand20forhotels.

From1July2017,communitygamingmachinetaxisimposedonclubsandhotelsatmarginalratesrangingfrom12.91percentto42.91percent,withrecentreformloweringthethresholdsatwhichthosemarginalratesareimposed.From1July2018,hotelswillbesubjecttofurtherchangestorates and thresholds.

8.4 CommunitybenefitsHotelsandthecasinosarealsosubjecttoa10percentcommunitybenefitlevyinadditiontogamingmachinetaxes,withrevenuefromthatlevycontributing$11milliontotheCommunityBenefitFundin2016-17.TheCommunityBenefitFundprovidesgrantstooffsetgaming-relatedharmandimprovecommunitywelfare.

Clubsarenotsubjecttothecommunitybenefitlevyinrecognitionthatclubsarenot-for-profitandalreadyprovidearangeofbenefitstothecommunity.

Clubshavesignificantdiscretioninthemannerandamountofcommunitybenefitstheyprovide.Thelevelofcontributionstothecommunityvarysignificantlyfromclubtoclubandyeartoyear.

Table8.1illustratesthereportedgrossgamingmachineprofitandcommunitycontributionclubsprovide(eitherbywayoffinancialassistanceorin-kindcontributions).

Table8.1:Communitysupportcontributionsfromlicensedclubsin2016-17

Clubsize(bygrossprofitfromgamingmachines)Grossprofitfromgamingmachines Gamingtaxpaid

Community contribution

Clubs1-10 $44.3M $15.3M $3.8M

Clubs11-20 $9.7M $2.4M $1.1M

Clubs21-28 $0.8M $0.1M $0.4M

Total $54.7M $17.8M $5.3M

Source:NorthernTerritoryDepartmentofBusinessCommunityBenefitFundAnnualReport2016-17

November 2017 | 33

8.5 Casino taxesTherearetwocasinosintheTerritory,SKYCITYinDarwinandLassetersinAliceSprings.Casinosarelicensedtooperatepokies,whichareadditionaltotheTerritory-widecaponmachinenumbersapplicabletoclubsandhotels.Territorycasinosarealsorequiredtoprovideadditionalactivitiesincludingtablegames,aswellasrestaurantsandotherfacilities.Thisindirectlylimitsthenumberofpokiesbyrequiringfloorspacetobeputtootheruses.SKYCITYalsooperatesNTKeno,whichisbroadcasttoothervenuesunderlicensingarrangements.

Aspartofacasinolicence,operatorsenterintoataxagreementwiththeGovernment.Casinotaxratesaresetoutintheagreements,withtaxessubjecttoreviewbyGovernmentonthetermssetoutintheagreements.SKYCITY’snexttaxreviewisin2025(andthenevery10years),whereasLasseters’reviewisin2022(andthenevery10years).

Thesetaxreviewsmusttakeintoaccounttheprofitabilityofthecasinos,gamblingharm,conductofthecasinosandthecasinos’investmentinthelocaleconomy,suchasthroughexpansion,refurbishment,communitysponsorshipandsupport,andtheprovisionofnon-gamblingentertainment,retailanddiningfacilities.Thereislimitedscopetoamendcasinotaxarrangementsoutsidetheagreementreviewclauses.

Presently,differenttaxratesapplytothegrossprofitsofeachtypeofgamblingactivityundertakenatSKYCITYandLasseterscasinos.ThesearesummarisedinTable8.2below.

Table8.2:Comparisonofcasinotaxes

Casino Poker machines Tablegamesandcommissionplay Keno

SKYCITY 15%plus10%community benefitlevy

RateequivalenttotheGSTrate 10%

Lasseters 11%1plus10%communitybenefitlevy

RateequivalenttotheGSTrate TaxpaidbySKYCITY

1Increasingto13 per centin2018,15 per centin2019and20 per cent in 2022.Source:CasinoOperatorsAgreements

8.6 LotterytaxCurrently,theTattsGrouppayslotterytaxbasedonnetprofitsoflotteriesphysicallysoldintheTerritoryandonlinethroughtheinternetlotterylicencegrantedbytheTerritorytoTatts Group.

Lotterytaxisbasedonanexclusive20-yearlicenceandagreementbetweentheTerritoryandTatts,negotiatedin2012.Toreflectthemonopolyrightsassociatedwiththeseagreements,andthegenerallackofseparatecommunityinvestmentincomparisonwithcasinosorothercommunitygamingvenues,lotterytaxratesaremuchhigherthanotherformsofgamingtax.Aslotterytaxesaresetbyagreement,reformoptionsarelimited.

8.7 WageringtaxWageringtaxispaidbyUBETinrelationtototalisator(‘tote’)wageringthoughTerritoryoutlets,clubsandpubs,andatracecourses.In2015,UBETwasgrantedalong-termexclusivelicencetooperatetotewageringintheTerritoryforaperiodof20years.


AlthoughthetermsofthatagreementreducedtheamountofwageringtaxpayabletotheTerritorybyUBET,itresultedinUBETprovidingsustainable,long-termfundingtotheracingindustrythroughthepeakbodiesThoroughbredRacingNTandtheDarwinGreyhoundAssociation.Thesebodiesreceivesignificantfixedannualfunding,monthlypaymentsbasedonfixedpricebettingrevenue,aquarterlyindustryfundingpackage,andracingandregionalmarketingsupportfees.Thesepaymentssignificantlyreducetheamountofindustryassistancegovernmentwouldotherwiseprovidetotheracingsector.

Duetothe20-yearexclusivityagreementcurrentlyinplacewithUBET(until2035),taxreformoptionsarelimited.

8.8 BookmakertaxandbettingexchangetaxAlthoughonlinebookmakershavearelativelysmallphysicalpresenceintheTerritory,theynonethelesscontributetotheTerritoryeconomy.Onlinebookmakersandbettingexchangesemployabout380Territoriansandprovideabout$42millioninbroadereconomicbenefitsincludingtaxes,sponsorships,productfees,rentandAboriginalemploymentprograms.

Bookmakersandbettingexchangespaytaxatarateof10percentongrossprofits,cappedatamaximumof500000revenueunits(currently$575000).Bookmakerspaidabout$5.4millioninbookmakertaxin2016-17.

TheTerritory’sbookmakertaxcapwassetindirectresponsetotaxcompetitionfromotherstates.Asaresult,bookmakersremainedintheTerritorybutatthecostofasignificantreductioninTerritorytaxrevenue.Aslongascurrentinterstatetaxcompetitionremains,thereislimitedabilityfortheTerritorytoadjustbookmakertaxrates.

However,oneareathatcouldbeexaminedisaligningthetreatmentofbetsmadeinrelationtosportingevents.Currently,bookmakertaxesareleviedongrossprofitsinrelationtobetsmadeonhorse,trottingandgreyhoundraces.Betsonothereventsarespecificallyexcludedincalculatinggrossmonthlyprofitfortaxpurposes.Asaresult,bookmakersprimarilyfocusedonbettinginrelationtosportingeventspaylowerbookmakertax.

Thereasonforthisinconsistencyislargelyhistoric,asgamblingonothersportingeventswasmuchlowerinthe1990sandTerritorygamblingtaxonothersportingeventswasrelativelylowpriortobeingremovedtomakewayfortheintroductionoftheGST.Expandingthetaxtoincludesportingevents could raise up to $1.1 million per annum.

Morerecently,otherstateshaveexpressedinterestinapoint-of-consumptiontaxonbookmakersbasedonthelocationofthepersonplacingthebet,ratherthanthelocationofthebookmaker.SouthAustraliacommencedapoint-of-consumptiontaxon1July2017,andimposesa15percenttaxonthenetwageringrevenueofallbettingcompaniesfrombetsplacedbycustomerslocatedinSouthAustralia.Thisnewtaxisexpectedtoraiseabout$10 millionperannumfortheSouthAustralianGovernment.

WesternAustraliaissettointroduceasimilartaxfrom1January2019anditsracingindustrywillbecompensatedforanydirectfinancialimpactsrelativetothecurrenttaxscheme.Themeasureisexpectedtoraiseover$20millionperannumfortheWesternAustralianGovernment.

November 2017 | 35

Incomparison,theTerritorywouldraiseonlyabout$1to$2millionifitfollowedtheSouthAustralianapproach,whereasmorethan$5millioninbookmakertaxwascollectedin2016-17.Althoughapoint-of-consumptiontaxhasadvantagesforotherstategovernments’taxrevenues,itpresentsachallengefortheTerritory,asmostbetsareplacedbyconsumersresidinginotherjurisdictions.

Otherissuesincludedesigningtaxestoavoiddoubletaxation,ensuringanewtaxcanbeeffectivelyimplementedbybookmakers,andrecognisingthepaymentofGSTandproductfeespaidtosportingbodies.

TheTerritoryopposestheintroductionofpoint-of-consumptiontaxes.However,giventhemovesbyotherstates,theTerritoryhasadvocated,throughtheCouncilofFederalFinancialRelations,thatanyintroductionofapoint-of-consumptiontaxshouldbethroughaunifiednationaltaxscheme,eitherthroughconsistentstatetaxescollectedbyasinglejurisdictionorbymeansofaCommonwealthtax.Suchamodelwouldreducetheadministrativeandcomplianceburdenthatwouldariseunderdivergentstatetaxmodels.

Discussion questionsQ8.1 Arethecurrentbroadpolicysettingsforgamblingtaxesappropriate?

Q8.2 Aregamblingtaxcollectionsatanappropriatelevel?Ifnot,howshouldgamblingprofitsbebetterdistributedbetweengamblingoperatorsandtheTerritory?

Q8.3 IfanygamblingtaxadjustmentswouldreducetherevenuereceivedbyGovernment,whatmeasuresshouldbetaken,orothersourcesofrevenueconsidered,tocompensate?


9 Motorvehicletaxes

9.1 MotorvehicletaxoverviewTherearetwomainTerritorytaxesimposedonmotorvehicles.Stampdutyisimposedonthetransferofownershipofamotorvehicle(motorvehicleduty)andfeesarealsopayableontheregistrationorrenewalofregistrationofamotorvehicle.

In2016-17,theTerritoryreceivedabout$70millioninmotorvehicletaxesoralmost10per cent ofown-sourcetaxandroyaltyrevenue.Thistotalcomprised$48millioninmotorvehiclefees($28millionfromlightvehicleregistrationsand$20millionfromheavyvehicleregistrations)and$22 million in motor vehicle duty.

Motorvehicletaxesarearelativelyefficientandstableformofrevenue.Motorvehicleregistrationfees,imposedperiodicallyandatlowerrates,aremoreefficientthanmotorvehicleduty,whichisimposedonatransactionalbasis.

Itisrecognisedthatmotorvehiclecostsareasignificantcomponentofhouseholdexpenditure.AustralianGovernmenttaxes,compulsorymotoraccidentinsuranceandothercostssuchascouncilparkingfees,eachincreasethecostofowningamotorvehicle.

9.2 MotorvehicledutyMotorvehicleownersarerequiredtopaystampdutyontheissueortransferofamotorvehiclecertificateofregistration.Stampdutyisleviedonthevalueorpurchasepriceofthevehicleatarateof$3per$100orpartthereof.ThisincludesvehicleaccessoriesandadditionalequipmentatthetimetheapplicationforregistrationortransferismadeaswellasanyGSTpayable.

DutyispayableattheMotorVehicleRegistryatthetimetheapplicationforregistrationortransferismade,withapplicationtobemadewithin14daysofapersonbecomingtheownerofthevehicle.

Duetomotorvehicleduty’srelativelylowrate,itsinfluenceontaxpayerbehaviourislikelytobelimited.Forexample,anadditional$150indutywouldbepayablebyaTerritoriandecidingbetweena$25000and$30000car.Comparedwiththecostofthecar,thestampdutyisunlikelytobeamajorfactorindecidingbetweenthetwochoices.

Totheextentthatithasaneffectonbehaviour,stampdutyismorelikelytodeterapersonfromregisteringchangeofownershipofamotorvehicle(asthisiswhenthedutyispaid)ratherthanthesaleorunderlyingchangeinownershipofavehicle.

• TheTerritoryimposesmotorvehicledutywhenownershipofavehiclechanges,andalsochargessix-monthlyorannualregistrationfees.

• TheTerritory’sstampdutyrateandregistrationfeesareamongthelowestinAustralia.ThiscontributestothetotalcostofregistrationofTerritoryvehiclesbeingbelowthenationalaverage.

• AustralianGovernmenttaxes,compulsorymotoraccidentinsuranceandothercostsincreasethecostofowningamotorvehiclefarmorethanTerritorytaxes.

November 2017 | 37

9.3 MotorvehicleregistrationfeesTerritorymotoristsarealsorequiredtopayasix-monthlyorannualfeetoregistertheirvehiclesforuseon-road.Vehicleregistrationhelpstoensuretheroadworthinessofmotorvehiclesandpromotestheirsimpleandreliableidentificationandproofofownership.

RegistrationfeesintheTerritoryarecollectedontheregistrationofbothlightandheavyvehicles.HeavyvehicleregistrationfeesaredeterminednationallybytheStandingCouncilonTransportandInfrastructure,andareadjustedinJulyeachyear.

LightvehicleregistrationfeesaredeterminedbytheTerritoryandvaryaccordingtoadifferentialscalebasedonenginecapacityandnumberofcylinders.Feesareexpressedinrevenueunits,whichmeansmotorvehicleregistrationfeesincreaseinlinewithinflation.

Althoughnottaxationrevenue,compulsorymotoraccidentcoveraddstothetotalcostofowningavehicle.MotoraccidentinsurancepremiumsintheTerritoryaresetbytheMotorAccidentsCompensationCommissionandfundno-faultinsurancetoroaduserswhoareinjuredordieasaresultofanaccident.Premiumsarebasedonensuringlikelycompensationclaimscanbemetandaresubjecttoactuarialreviewannually.IntheTerritory,premiumsareaffectedbyhighercostsassociatedwiththeTerritory’ssmallpopulationbaseandhighincidenceofroadaccidentcasualties.Nonetheless,Territorymotoraccidentpremiumsarearoundtheaverageoftheotherstates.

9.4 Interstate comparisonTheTerritory’sstampdutyrateandmotorvehicleregistrationfeesareamongthelowestinAustralia.Intermsofstampduty,incomparisonwiththeTerritory’sflat3percentrate,otherjurisdictionsapplyvariousprogressiveratescalesandoftenapplydifferentratesforpassengerandcommercialvehicles.Forexample,forpassengervehiclesaboveacertainvaluethreshold(rangingfromover$40000inTasmaniato$65000inVictoria),higherratesofbetween4percentand6.5percentmayapplyinterstate.

AnumberofmotorvehicledutyexemptionsapplyintheTerritoryandinterstate,includingwhenregistrationistransferredbetweenjurisdictions,agriculturalorprimaryproductionvehicles,vehiclesownedbycharities,andtradingstockofmotorvehicledealers.Someenthusiastvehicles,caravansandtrailersmayalsobeexempt.IntheAustralianCapitalTerritory,agreenvehicleratingschemeapplies,whichprovidesforconcessionalratesofdutybasedonlowervehiclecarbondioxide emissions per kilometre.

Formotorvehicleregistrationfees,somestatescalculatefeesbasedongrossvehiclemassandtareweightandsomebasedonenginecapacityandnumberofcylinders.Somestatesalsoimposeemergencyservicelevies,trafficimprovementlevies,roadrescuefeesandroadsafetycontributionfees.AscanbeseeninTable9.1,whichcomparesarangeofpopularlightvehicles,theTerritory’smotorvehicleregistrationfeesareamongthelowestinAustraliaandcontributetotheTerritory’stotalcostofregistrationgenerallybeingbelowthenationalaverage.


Table9.1:Motorvehicleregistrationcostscomparison

Vehicle NSW VIC QLD WA SA TAS ACT NT Avg

2017ToyotaCorolla/Hyundaii30

Registrationfee($) 358 290 310 301 123 200 366 179 266

Compulsoryinsurance,othercharges($)

638 510 435 421 648 377 700 559 536

Total registration cost ($) 996 801 746 721 771 577 1 066 738 802

Ranking1

Registrationfee 7 4 6 5 1 3 8 2

Total costs 7 6 4 2 5 1 8 3

2017ToyotaHiluxSR5



1309 512 471 392 734 377 700 559 632

Total registration cost ($) 1 822 802 782 866 1 188 577 1 233 738 1 001

Ranking1


Total cost 8 4 3 5 6 1 7 2

2017HoldenCommodore–Evoke



638 510 435 421 648 377 700 559 536

Total registration cost ($) 1 151 801 927 786 900 610 1 233 786 899

Ranking1


Total cost 7 4 6 3 5 1 8 2

2017 Nissan Patrol



638 510 435 421 648 377 834 559 533

Total registration cost ($) 1 353 801 1 124 1 047 1 005 669 1 646 1 097 1 093

Ranking1


Total cost 7 2 6 4 3 1 8 5

1 Rankingof1representsthelowestfees/costofallstates.Source:Statelegislationandinformationavailableat31October2017

Table9.2comparestherevenue-raisingeffortasassessedbytheCommonwealthGrantsCommission(CGC)foreachjurisdictionasat2015-16,themostrecentavailableyear.TheCGC’scomparisonshowstheTerritoryhadthelowesteffortofallstatesandterritorieswithrespecttomotortaxes.

November 2017 | 39

Table9.2:Motortaxesrevenueraisingeffort2015-16(percent)

NSW Vic Qld WA SA Tas ACT NT NT rank

Motortaxes 121 81 104 100 81 73 111 66 Lowest

Note:Lowestmeansleasttaxrevenueraised.Source:CGC2017Update

Duetothetimingofavailabledata,Table9.2doesnotreflecttheincreaseinregistrationfeesinrecentstateandterritorybudgets.ThisincludesanincreaseinTerritoryfeesfrom1July2017,providinganadditionalrevenueof$5.2millionperyear,whichshouldmovetheTerritory’smotortaxesrevenueeffortcloserto,butstillbelow,thenationalaverageeffort.

9.5 PotentialreformoptionsTheTerritorycouldconsiderfurtherincreasingitsrevenueefforttomorecloselyreflectthenationalaverage.

OnepotentialreformoptionmaybetomovetheTerritory’sregistrationfeecomponentofoverallregistrationfurthertowardsthenationalaverage.Thiscouldbeachievedimmediatelyorwithsmallerincreasesoffeesovertimeinordertoreducetheimpactonthecostofliving.

Anotheroptionforreformmaybetolowerorremovemotorvehiclestampdutyandreplacetherevenueforgonewithhigherregistrationfees.Changingthemixbetweenmotorvehicleregistrationfeesandstampdutywouldhavesomebenefitsanddisadvantages.Areductioninmotorvehicledutymayencourageorfacilitatemotoriststoupgradetheirvehicles,leadingtonewer,moreenvironmentallyfriendlyandsafervehiclesonTerritoryroads.

However,higherannualregistrationfeeswouldhaveagreaterimpactonlowerincomeTerritorianswhohavelessabilitytopay.

Table9.3:Lightmotorvehicleregistrationfeeoptions

Current + 5%increase1 +10%increase1

Revenue $33M $1.6M $3.3M

2017ToyotaCorolla/Hyundaii30 $179 $9 $18

2017ToyotaHiluxSR5 $179 $9 $18

2017HoldenCommodore $227 $11 $23

2017 Nissan Patrol $538 $27 $54

1 Percentagesreflectincreasestotheregistrationfeeanddonotreflectapercentageincreasetototalregistrationcosts,whichwouldbelower.


Discussion questionsQ9.1 Arethecurrentbroadpolicysettingsformotorvehicletaxes,includingthemix

betweenmotorvehicledutyandfees,appropriate?Shouldanadjustmenttothismixbemade?

Q9.2 Whatotherimprovementstomotorvehicletaxescouldbeconsidered(forexample,specificexemptionsorsimplification)?


10 Insurance duty

10.1 OverviewofstampdutyoninsuranceLikemostotherstates,theTerritoryimposesstampdutyoninsurance.IntheTerritory,insurancedutyisonlyimposedongeneralinsurance.Insurancedutyiscalculatedatarateof10percentofthepremiumchargedtotheinsuredperson,includingGST.

Insurancedutydoesnotapplytoapolicyofreinsurance,privatehealthinsurance,workerscompensationinsuranceundertheReturn to Work Act,freightandcommercialmarineinsuranceorlifeinsurancepolicies.

Insurancedutyispaidbyinsurers,howeverthecostispassedtocustomersintheformofhigherinsurance prices.

In2016-17,theTerritorycollectedabout$43millionininsuranceduty,orabout6percentofown-sourcetaxandroyaltyrevenue.

10.2 InsurancedutydesignissuesInsuranceproductsarepurchasedbymanyTerritorianstohelpmanagetheirrisk,withthepaymentofapremiummadeforcoveragainstlossifcertaineventsoccur.Insurancecanprovideasafetynetandcanbedescribedasasocialgood.

Privateinsuranceisconsidereddesirablefromapublicpolicyperspective(particularlyintheeventofalargescaledisaster).Totheextentthatinsurancedutyincreasesthecostofinsurance,itmaydeterpeoplefromtakinguptheappropriatelevelofinsurance.Non-insuranceislikelytobemoreprevalentamongforpersonsonlowerincomes,whomayalsobemorevulnerableintheeventofloss.

Overall,complyingwithinsurancedutyisreasonablystraightforwardforinsurersandadministrativecostsarelow.Insomecases,wherethepolicyrelatestoriskorpropertybothinsideandoutsidetheTerritory,thepremiumneedstobeapportionedandthisimposesanadditionalcomplianceburden.Suggestionsforsimplificationwouldbewelcome.

Inanyevent,broaderreformofinsurancedutyneedstotakeintoaccountitscontributiontoown-sourcerevenue.ItisworthnotingthatallstatesotherthantheAustralianCapitalTerritorycontinuetoimposeinsurancedutyatratessimilartotheTerritory.

• Insurancedutyincreasesthecostofinsurancebutitisreasonablyadministrativelysimpleandanimportantsourceofrevenue,raisingabout$40millioneachyear.

• Asignificantreductionininsurancedutyratesorabolitionwouldrequireothertaxreform.

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10.3 PotentialreformReducingtherateofinsurancedutymaybedesirablefromaneconomicefficiencyperspective,asitcouldlowerinsurancepremiumsandencourageindividualsandbusinessestotakeupanappropriateamountofinsurance.

However,a25percentreductionofinsurancedutyrates(to7.5percent)wouldcostaround$11millionannually,andafullabolitionwouldcostover$43million.

Introducingspecificexemptionsforcertainclassesofinsurancemaybeanalternativereform.Creatingnewspecificexemptionscostslessthanfullabolitionofinsurancedutybutcouldachievesomeofthesamepolicygoalsbyreducingthecostofaclassofinsuranceproducts.However,specificexemptionswouldincreasecomplexityandonlybenefitpolicyholderswiththespecificexemption.Exemptionscanalsopotentiallydistortinsurancepolicymarketsbymakingthenon-exemptpoliciescomparativelymoreexpensive.

Discussion questionsQ10.1 Arethecurrentbroadpolicysettingsforinsurancedutyappropriate?

Q10.2 Whatotherimprovementstoinsurancedutycouldbeconsidered(forexample,specificexemptionsorsimplification)?

Q10.3 Ifanyinsurancedutyreformswouldreducetherevenuereceivedbygovernment,whatmeasurescouldbetakentocompensate?


11 Bankingtaxes

11.1 TheCommonwealth’smajorbanklevyInits2017-18Budget,theCommonwealthintroducedamajorbanklevyonbankswithover$100billionintotalliabilities.Asaresult,themajorbanklevyappliestoAustralia’sfivelargestbanks:theCommonwealthBank,ANZ,Westpac,NABandMacquarieBank.

Thelevyappliesfrom1July2017andisbasedontheliabilitiesofeachbank,lesssomeexclusionsconsideredlowriskanddepositsupto$250000.Thelevyissetattherateof0.015percentpayablequarterly,whichequatestoanannualrateof0.06percent.Themajorbanklevyisforecasttoraiseabout$1.5to$1.6billionperannumfortheCommonwealthGovernment.

TheCommonwealth’sstatedpolicyrationaleforintroducingthemajorbanklevyis:

• ensuringthebankingsectormakesafaircontributiontotheeconomygivenitsuniqueroleinAustralia’seconomyandassociatedsystemicrisksitimposes

• improvingcompetitionandaccountability

• complementingprudentialreforms.

Themajorbanklevyfollowsa2010recommendationbytheInternationalMonetaryFundtointroduceataxonthefinancialsector,withseveralcountrieshavingintroducedsimilarleviessince2010.SuchataxmaybejustifiedonthebasistheCommonwealthGovernmentwouldsupportAustralia’slargestbanksintheeventofasignificantfinancialcrisis.Asaresult,thecreditratingsofAustralia’slargestbanksbenefitfromtheperceptionorexpectationofCommonwealthsupport.ThevalueofthisimplicitsubsidywasestimatedbytheReserveBankofAustraliaatabout$1.9billionin2013.

Intermsoftheimpactofthemajorbanklevy,althoughpayablebyAustralia’sfivelargestbanks,thecostmaybepassedontobankcustomersintheformofhigherinterestrateschargedtoborrowersandlowerinterestratesondeposits.

Ifcompetitivepressurefromsmallerbanksandotherfinancialinstitutionslimitstheimpactonbankcustomersthentheprofitabilityofthemajorbankscoulddecrease,withconsequencesforbankshareholders.

• AnewbanktaxwouldhavethepotentialtoprovidetheTerritorywithsignificantrevenueofabout$24million,basedontheCommonwealth’smajorbanklevyandSouthAustralia’ssimilar proposal.

• ThetaxwouldbepaidbyCommonwealthBank,ANZ,Westpac,NABandMacquarieBank.However,thecostofthetaxmaybepassedontobankcustomersintheformofhigherinterestrateschargedtoborrowersorlowerinterestratesondeposits.

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11.2 Introduceastatebanklevy?InSouthAustralia’s2017-18Budget,asimilarbanklevyatthesamerateof0.015percentwasproposedbuttheenablinglegislationisyettobepassedbytheSouthAustralianParliament.TheSouthAustralianbanklevyisforecasttoraise$417millionoverthenextfouryears.

Importantly,theSouthAustralianbanklevywouldbeimposedonSouthAustralia’sshareofthetotalvalueofbankliabilitiessubjecttothemajorbanklevy.SouthAustralia’sshareofbankliabilitiesistobebasedonSouthAustralia’sgrossstateproductshareofnationalgrossdomesticproduct. This is currently about 6 per cent.

AlthoughabanklevywasnotincludedinWesternAustralia’s2017-18Budget,theWesternAustralianGovernmenthassaiditwillconsiderintroducingabanklevysimilartothatproposedinSouthAustralia.

Bywayofcomparison,basedontheTerritory’sgrossstateproductshareof1.4percent,theTerritorycouldraiseabout$24millionfromanewbanklevywithasimilardesigntothatproposedinSouthAustralia.

Thereisariskifastate-imposedbanklevywaspassedontoborrowersintheformofhigherinterestrates,thenthiscouldreducehomeownership,especiallyforborrowersonlowerincomes.AfurtherriskisaconstitutionalchallengeagainstanystatebanklevyintheHighCourt.ConcernshavealsobeenexpressedinSouthAustraliaabouttheeffectofthebanklevyoncustomersandinvestment in the state.

Discussion questionQ11.1 ShouldtheTerritoryconsiderintroducingabanklevy?


12 Mineralroyalties

12.1 MineralroyaltyoverviewMineralroyaltiescanbeaverysignificantbuthighlyvariablecomponentoftheTerritory’sown-sourcerevenue,raising$165millionin2016-17.

Unliketaxes,royaltiesarecollectedbytheTerritoryfrombusinessesaspaymentfortherighttoextractcommoditiesownedbythecommunity.

IntheTerritory,mostminespayprofit-basedmineralroyalties.However,severalminesaresubjecttolegacyagreementsthatimposeroyaltiesbasedonthevalueofmineralsextracted.Overall,themajorityofroyaltiesarepaidbyonlyaminorityofTerritoryminersduetotheframeworkoftheTerritory’sprofit-basedroyaltyscheme.SomepastminespaidlittlemineralroyaltiestotheTerritory,havingopenedforshortperiodsbutthenclosedbeforeincurringroyaltyliabilitiesorareunder‘careandmaintenance’.ThisisarguablyadrawbackoftheTerritory’sprofit-basedroyaltyscheme.

RoyaltycollectionsarealsoimportantforAboriginalpeopleinrelationtominingonAboriginalland.TheCommonwealthmakespaymentstotheAboriginalBenefitsAccountequaltotheamountsofanyroyaltiesreceivedbytheTerritoryinrespectofamininginterestinAboriginalland.ThesepaymentsarethendirectedtothebenefitoftraditionalownersandotherAboriginalTerritorians,includingthroughthelandcouncils.

TheFraserInstitute’sAnnualSurveyofMiningCompaniescontinuestoranktheTerritoryveryhighintheworldformineralpotentialandinvestorattractiveness,inpartduetotheTerritory’sprofit-basedroyaltyscheme.Thesurveyalsorecognisesafavourableroyaltyschemeisoneofmanyfactorsaffectingexplorationandmininginvestmentdecisions.

12.2 The Mineral Royalty Actprofit-basedschemeMuchoftheTerritory’sroyaltiesarecollectedundertheMineral Royalty Act,whichisaprofit-basedroyaltyschemeintroducedin1982.Royaltyiscalculatedbasedonminingrevenuelessproductionandotherdirectlyrelatedexpenses.Profit-basedroyaltiesaremorecomplexthanvalue-basedorquantity-basedroyaltyschemes.

ThemainfeaturesoftheMineral Royalty Actare:

• Auniformschemeregardlessofthetypeofmineralsproduced.

• 20percentroyaltyrateonthenetvalueofmineralproduction,subjecttoa$50000netvalueroyalty threshold.

• Mineralroyaltiesaremostlycollectedunderaprofit-basedscheme,apartfromseveralminesoperatingunderlegacyvalue-basedarrangements.

• Mineralroyaltiesareanimportantbuthighlyvariablesourceofown-sourcerevenueforthe Territory.

• However,somemineshavepaidlittleornomineralroyaltiestotheTerritoryundertheprofit-basedscheme.

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• Thelifecycleofamineisrecognisedbyallowingthedeductionofcertainexploration,pre-production,productionandrehabilitationcostsessentialtoproducethemineralcommodity.

• Changesinprofitabilityoveramine’slifeimpactsonroyaltycollections,thatis,lessroyaltyispayabletotheTerritoryatcommencementofmining,buthigherroyaltyshouldbecollectedasaminematuresandgeneratesmoreprofit.

• Thereisastrongergrowthinroyaltycollectionsintimesofhighermineralpricesthanundervalue-basedschemesbuthastheoppositeresultintimesoflowermineralprices.

• Negativenetvalue(thatis,wheredeductiblecostsaregreaterthanrevenueinayear)canbecarriedforwardandaccumulatedbyaroyaltypayeruntiloffsetagainstprofits.Royaltybecomespayableafterallprioryearcostsarefullyabsorbed.

• Accelerateddeductionofcapitalcoststhatrecognisesthedepreciationofminingassetsandthecostoffinancing.

• Royaltyiscalculatedonaproductionunitbasisanddoesnotaggregaterevenueandexpensesfromotherminescarriedoutbythesameoperator.

12.3 InterstatealternativesWiththeexceptionoftheCommonwealth’sPetroleumResourceRentTax(PRRT)andtheroyaltyarrangementforBarrowIslandinWesternAustralia,theTerritoryisuniqueastheonlyAustralianjurisdictionthathasawhollyprofit-basedroyalty.Theroyaltiesandratesadoptedinterstatevarybetweenthejurisdictionsanddependonthecommodity,whichcanmakedirectcomparisonsdifficult.However,otherjurisdictionslargelyimposeroyaltiesbasedonthevalueorquantityofmineralsextracted.TasmaniaandQueenslandhaveexceptionswithhybridvalue/profitroyaltyschemesforsomemineralcommodities.

Value-basedroyalties(alsoreferredtoasadvaloremroyalty)areleviedonthevalueofthemineralproducedwithoutregardtothecostsincurredbytheminer.Incomparisontoprofit-basedroyalties,value-basedroyaltiesaremorepredictableandlessresponsivetochangesincommodityprices.However,theycannotreadilytakefulladvantageofsuddenincreasesincommoditypricesandminingprofits.

Oneofthemainadvantagesofferedbyvalue-basedroyaltiesistheyaresimplerandmoretransparentforgovernmentandminerstoadminister,whilealsoprovidingamorepredictablesourceofrevenue.

Whileprofit-basedroyaltiescanreflectthestrongergrowthofroyaltyrevenuesduringtimesofhighmineralprices,theoppositeresultmaybeobservedintimesoflowmineralpriceswhenvalue-basedschemescontinuetoprovideamoresteadyroyaltyonthemineralsconsumed.

Accordingly,somejurisdictionsapplyahybridvalue/profitroyaltyscheme.Suchaschemeprovidessomeroyaltyforeachyearofmineproductionwhilealsomaintainingtheabilitytotakeadvantageofasignificantincreaseincommoditypricesandminingprofits.Byensuringallminersproducingproductpayaroyaltyonthatproduction,ahybridroyaltyschemecanmeettheobjectiveofthecommunityreceivingareturnfromtheremovalofitsnon-renewableresources.


12.4 HistoricaltrendsintheTerritory’sroyaltyreceiptsAsanumberoftheTerritory’smineshavebecomewellestablished,theTerritory’sroyaltycollectionshaveincreasedsignificantlyandthebenefitsoftheTerritory’sprofit-basedroyaltyschemehavebecomemoreevident.TheincreaseintheTerritory’smineralroyaltyreceiptsinrecentyearsalsocorrespondswithasimilarincreaseinminingrevenueeffortasassessedbytheCommonwealthGrantsCommission(CGC).

Duringthe1980s,1990sandearly2000s,thevalueofproductionandprofitabilityofmineswasmuchlowerandfewerroyaltieswerecollected.Theincreaseinroyaltycollectionssince2007-08demonstratestheeffectivenessoftheTerritory’sprofit-basedroyaltyschemeinensuringanoverallfairreturntothecommunityonitsnon-renewableresources,especiallyinrelationtoseveralofitswell-establishedmines.

Bycontrast,inordertobenefitfromhighmineralprices,interstategovernmentsincreasedvalue-basedcoalandironoreroyaltyrates.Thisprovidedbetterreturnstothecommunityinresponsetothesuperprofitsgeneratedbysomeminingcompanies.However,thesereactionaryincreasesgenerallyoccurredafterperiodsofhighprofitabilityenjoyedbyminers.

ComparisonsoftotalroyaltyreceiptsaremadebytheCGCforeachstateandterritory.TheCGChasassessedtheTerritory’seffortasaroundorabovethenationalaverageinrecentyears.Revenueeffortistheratioofactualrevenuetotherevenueraisedifajurisdictionappliesthenationalaveragelevelofroyalty.

IncomparisontotheTerritory’saverageorabove-averageeffortinrecentyears,from2002-03to2006-07,theTerritory’sassessedminingrevenue-raisingeffortwasbelowthenationalaverage.ThismeanstheamountofminingrevenuetheCGCassessedtheTerritoryashavingcapacitytoraisewassignificantlygreaterthanwhatwasactuallyreceivedfromTerritorymines.

Chart12.1showstheTerritory’srevenueeffortinrelationtominingroyaltiesfrom2002-03to2015-16asassessedbytheCGC.

Chart12.1:NorthernTerritory’sminingrevenueraisingeffort

Source:CGCupdatesandreviews

Chart12.1alsodemonstratestheincreaseintheTerritory’sminingrevenueeffortduringthe‘commoditiesboom’in2008and2009,whichcorrespondstoasignificantspikeinroyaltyreceipts.

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12.5 DesignissueswiththeTerritory'sprofit-basedroyaltiesAlthoughroyaltycollectionsandminingrevenueefforthaveincreasedsignificantlyinrecentyears,followingyearsofrelativelylowroyaltycollections,itisimportanttonotetheCGC’sassessmentprovidesaggregateinformationabouttheeffectsoftheTerritory’sroyaltyschemeoverall.ThehighprofitabilitysomeminesarenowexperiencingisbalancedbyotherminespayinglittletonoroyaltiestotheTerritory.

Asaminematures,andinitialcapitalcostsarerecoupedandproductionvolumesincrease,anincreaseinprofitabilityshouldresult.However,therisksinherentinminingmayexplainwhyanumberofTerritorymineshavepaidlittletonoroyaltiesundertheMineral Royalty Act. The complexityofthelegislationunderpinningtheTerritory’sprofit-basedroyaltyschemeandthescopeofdeductionsandabilitytocarryforwardlargelosses,mayalsobeacontributingfactor.

InrecentyearsanumberofsmallermineshaveoperatedintheTerritoryforrelativelyshortperiodsandthenclosedorplacedintocareandmaintenance,duetoarangeoffactors.Suchfactorsincludehigherthanexpectedcosts,short-liveddecreasesincommoditypricesorlowerthanexpectedmineralgradesandrecoveries.Theseshort-livedminesdidnotpayroyalties.

Arguably,therecentexperiencewiththesesmallermineswasnotcontemplatedinthedesignofthe Mineral Royalty Act,whichanticipatesminingoperationsmovingfromtheinitialstart-upphasetoincreasedproductionandprofitabilitywhenhigherroyaltiesbecomepayable.Thispotentiallyindicates the Mineral Royalty Act appliesmoreeffectivelytolong-lifemineswheretheinitialcostsare recouped over a decade or more.

12.6 PotentialreformoptionsTheGovernmentisinterestedtohearofpotentialreformsthatwouldensureTerritoryroyaltiesaremoreeffectiveandsupportiveofbusinessesbutensureanappropriatereturntothecommunityfortheextractionofnon-renewableresources.

Adjust the headline mineral royalty rate Themineralroyaltyratewasincreasedfrom18percentto20percentin2010;theonlychangetotheratesincetheintroductionofthelegislation.PriortotheintroductionoftheMineral Royalty Actin1982,aroyaltyratehigherthan20percentwasinitiallyproposed,andthecurrentratecomparesfavourablytotheCommonwealth’sresourcerenttaxrates.

Althoughdifficulttoaccuratelyforecast,every1percentagepointchangeinthemineralroyaltyrateequatestoachangeinroyaltycollectionstotheTerritoryofabout$8to$10million.Thisnumberissensitivetocommodityprices,currencyexchangeratesandproductionlevels.

Aprofit-basedroyaltyratethatistoohigh,however,mayactasadisincentivetoundertakeminingactivitiesintheTerritoryandlowertheTerritory’scompetitivenessincomparisonwithotherjurisdictions.

Introduce a value-based minimum royaltyTheintroductionintothecurrentprofit-basedschemeofaminimumlevelofroyaltypaymentusingavalue-basedmethodwouldensureaminimumreturntotheTerritoryfrommining,regardlessoftheprofitabilityofthemine.Guaranteeingaminimumreturnoffersabuffertofluctuatingroyaltycollectionsoverthelifecycleofamineunderaprofit-onlyscheme.Aminimumvalue-basedroyaltywouldnotimpactthoseTerritoryminescurrentlypayingprofit-basedroyaltyabovetheleveloftheset minimum amount.


However,thistypeofschemewouldrequirethoseminesnotpayingroyaltyunderthecurrentrulestopayaroyalty.Itwouldalsoaddressthecontentionthatcurrentmineralroyaltyrulesallowthecollectionofroyaltytobedeferredtoolongandwouldprovideareturntothecommunityfromshort-termminingoperationsthatotherwisewouldnotpayprofit-basedroyalties.

Toreduceanydisincentivetofutureinvestment,arelativelylowminimumvalue-basedroyaltyratecouldbeset.Forexample,a2to4percentroyaltybasedonthegrossvalueofmineralproductionwouldraiseabout$11to$22millionperannum.Again,thisestimateissensitivetocommodityprices,currencyexchangeratesandproductionlevels.Aminimumroyaltyrateof4percentorlessmayalsobecompetitivewiththevalue-basedroyaltiesinotherjurisdictions.

Aminimumvalue-basedroyaltyguaranteesaminimumreturntotheTerritoryonanylevelofproduction.

Replace current profit-based scheme with a value-based schemeIntroductionofavalue-basedschemewouldprovidetheTerritorywithamoresteady,butlikelyloweroveralllevelofroyaltyrevenue.

However,theTerritory’sprofit-basedroyaltyschemeisattractivetothedevelopmentofnewminingsitesintheTerritoryandcontributestothehighinternationalratingassignedtotheTerritoryintheFraserInstitute’sAnnualSurveyofMiningCompanies,whencomparedtopurelyadvaloremroyalties.

Anyfundamentalchangeofthisnaturewouldneedtoconsidergrandfatheringthearrangementsinplaceforexistingmines,astheprofit-basedschemeiscentredonawholeofminelifeconcept,withlittletonopaymentsearlyinminelifeandhigherpaymentsastheminematures.

Base reforms and efficienciesAroyaltyschemeshouldpromotecertaintybyhavingcontemporaryrulesclearlyspecifyhowroyaltyistobedetermined.Asaresult,royaltypayersshouldunderstandtherulesandbeabletocomplywiththemcorrectly,whichleadstoincreasedstakeholderconfidenceintheintegrityandtransparencyoftheroyaltyscheme.

ChangestotheMineral Royalty Act may be appropriate to modernise the provisions and reduce red tape.ItisimportanttogenerateanappropriatereturntoTerritoriansonfinitemineralresourcesandsupportinvestmentinexplorationanddevelopmentofthoseresources.

OutlinedbelowareanumberofoptionsforreformtotheoperationandefficiencyoftheMineral Royalty Act.Suggestionsandcommentsareinvitedinthisregard.

Operating costs Tocalculatetheroyaltypayable,amineoperatorisentitledtodeductarangeofoperatingcostsincurredintheproduction,maintenanceforproduction,saleormarketingofamineralcommodity.Inordertobeaneligibleoperatingcost,anexpensemustbereasonableinamountanddirectlyattributabletotheproductionofasaleablemineralcommodity.

Thelegislationcurrentlysetsoutthedefinitionofoperatingcostsinbroadterms,listingspecificexpensesthatmaybeconsideredoperatingcostsandspecificexpensesnotconsideredoperatingcosts.Competinginterpretationsareencounteredonconceptssuchas'directlyattributable'or'reasonableinamount'.

Alternatively,deductionrulescouldbeamendedtoprovidegreaterclarityorincentivesforcertainkindsofbehaviour.Forexample,currentoperatingcostrulesexcludecostsforofficeslocatedoutsidetheTerritory.SimilarrulescouldbeusedtoencourageminerstoemploylocalworkersratherthanFIFOarrangements.

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Governmentisinterestedonviewsastowhetheritisdesirabletoclarifythescopeofthedefinitionofoperatingcosts,ensuringcostsareproperlycategorised,andifso,how?

Determining mineral value Bysettingthevaluationpointattheboundaryofamine,royaltyispayabletotheTerritoryformineralsintheirnaturalstate,ratherthantheenhancedvalueofarefinedmineral.Wherethereisnocontractedsalepriceatthetimethemineralsleavetheminesite,thevaluemustbeestablishedthroughothervaluationmethods.

Inmanycases,themineralswillbesoldshortlyafterbeingremovedfromtheminesite,inwhichcasethesalevaluecanbeusedinmuchthesamewayasifthemineralsweresolddirectlyfromtheminesite.However,morecomplexandlessreliablevaluationmethodsmustbeutilisedwherethisdoesnotoccur,orifthesalepricedoesnotreflectanarm’slengthoropenmarketprice.

Themostappropriatevaluationmethodcanvarybetweenminerandmineral,andmayalsodependonthegradeandqualityofthecommodity.TheTerritoryhaspublishedaguidelinelistingacceptablevaluationmethods.However,insomecases,valuationmayneedtoberesolvedonacase-by-casebasishavingregardtothecircumstancesofeachmineandcommodity.Thisapproachlackscertaintyforbothadministratorsandroyaltypayers,andhasbeenthecauseofcomplexandcostly disputes.

Accordingly,itmaybeappropriatetoconsideroptionstoimplementbettervaluationpracticesaimedatreducingdisputesandincreasingcertainty.Governmentisinterestedinviewsastowhetheritisdesirabletoclarifyvaluationpracticesandifso,how.

Consider appropriateness of negative net value transferabilityCurrently,whenamineissold,negativenetvalue(thatis,deductiblecostsexceedingrevenue)accruedbytheroyaltypayeristransferabletothenewownerofthemine.Whenthenegativenetvalueexceedsthepurchasepricepaidforthemine,thisresultsinananomalousoutcomewhereanewminerisminingprofitablyafterrecoupingitspurchasepricebutisnotinaroyalty-payingpositionduetothesubstantialnegativenetvalueincurredbythepreviousowner.

Accordingly,theremaybemeritinexaminingthepolicyofallowingthecarryforwardofnegativenetvaluefromyeartoyearandlimitingittotheroyaltypayerwhoactuallyincurredthelosses.Alternatively,itmaybeappropriateforanewownerofaminetoonlybeabletoinheritalimitedamountofnegativenetvalue.

Alignment with Commonwealth taxation conceptsCurrently,therearearangeofconceptsusedtodetermineamine’sroyaltyliability,similarinnaturetothoseusedinCommonwealthtaxationpurposes,butwhichhaveadifferentapplication.Forexample,deductionsfordepreciationandcapitalallowancesoreligibleresearchanddevelopmentexpenditure.

Whereappropriate,aligningmineralroyaltyconceptswithCommonwealthreportingrequirements,orotherwisewithstandardaccountingpractices,maysaveminersthecostassociatedwithmaintainingseparatereportingschedulesfordifferenttaxorroyaltyschemes.Governmentisinterestedwhetherthesereformswouldassistminersinstreamliningtheirreportingobligations.


Administrative amendments to clarify and moderniseItisalsorecognisedthereareadministrativeefficienciestobegainedoropportunityexiststomakeotherchangestotheroyaltyschemethatwouldassistinreducingtheadministrativeburdenonroyalty payers.

Theadministrativeframeworkcouldbemodernisedwithaviewofincreasingclarityandtransparencyarounditsoperation.AdministrativemodernisationhasoccurredforotherTerritorylegislationinrecentyears,includingtheTaxation Administration Act, whichprovidesusefulmodelprovisionsthatmaybesuitabletoadoptforroyaltypurposes.

Discussion questionsQ12.1Arethecurrentbroadpolicysettingsformineralroyaltiesappropriate?

Q12.2 Does the mineral royalty scheme provide an appropriate return to the community,bearinginmindtheneedtobalanceafairreturntothecommunitywithareturntoproducers?Istheremeritinconsideringaminimumroyaltyrequirementinthescheme?

Q12.3Whatotherimprovementstothemineralroyaltysystemcouldbeconsidered?

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13 Petroleumroyalties

13.1 PetroleumroyaltyoverviewThereiscurrentlyamoratoriumonunconventionalpetroleumproduction,suchashydraulicfracturing,intheTerritorywhiletheScientificInquiryintoHydraulicFracturingintheNorthernTerritory is conducted.

ThepetroleumroyaltymattersraisedbelowdonotpresumeanyparticularoutcomeorrecommendationfromtheScientificInquiry,orparticularpolicystanceoftheGovernment.Rather,theroyaltymattersbelowreflectlong-standinglegislativeprovisionsgoverningpetroleumroyaltiesintheTerritoryandassociatedissueswithcurrentconventionalpetroleumproducers.

TheTerritorychargesa10percentvalue-basedroyaltyonallonshorepetroleumresourceswithintheTerritoryanditscoastalwaterboundaries.Petroleumsourcedfromoffshore,suchastheBayu-Undanfieldprocessedattheliquefiednaturalgas(LNG)plantatWickhamPointandtheIchthysfieldprocessedattheINPEXLNGprojectaresubjecttotaxationbytheCommonwealthandnotsubjecttoTerritoryroyalties.

13.2 The Petroleum Act royalty schemeThemainfeaturesoftheTerritory’scurrentpetroleumroyaltyschemeare:

• RoyaltiesunderthePetroleum Actarechargedatarateof10percentonthepetroleum’sgrossvalueatthewellhead(thepointofextraction).

• Petroleumroyaltyiscalculatedonaprojectbasisanddoesnotaggregateincomeandexpensesfromoperationscarriedoutbythesameproducerinrelationtootherfields.

• NegotiationsbetweentheTerritoryandlicenseesarerequiredtoestablishanagreementforeachindividualproject.Administrativearrangementsarealsosetbywayofagreementratherthanlegislation.

• Exploration,drilling,capitalandothercostsincurredupstreamofthewellheadarenotrecognised.Similarly,abandonmentordecommissioningcosts(includingmothballingandrehabilitationexpenditure)arenotspecificallydeductible.

• Petroleumroyaltycalculationsarenotdirectlyaffectedbytheprofitabilityofthefield.Asaresult,royaltyispayableassoonasproductioncommences,regardlessofthequality,sizeandlocationofthefield.

• Thereiscurrentlyamoratoriumonunconventionalpetroleumproduction,suchashydraulicfracturing,intheTerritorywhiletheScientificInquiryintoHydraulicFracturingintheNorthern Territory is conducted.

• Thepetroleumroyaltymattersdiscussedinthischapterdonotpresumeanyparticularoutcomeorrecommendationfromthescientificinquiry,oranypolicystanceoftheGovernment.

• Petroleumroyaltiesarecollectedundera10percentvalue-basedscheme.

• Therecouldbeimprovementstothecurrentscheme,includinghowpetroleumisvaluedforroyalty purposes.


TheTerritoryimposesa10percentroyaltyononshorepetroleumproductionbasedonthepetroleum’sgrossvalueatthewellhead(thepointofextraction).Royaltiesareimposedaspetroleumpassesthewellhead,beingthepointinproductionwhereownershipofthenaturalresourcepassesfromtheTerritorytotheproducer.

Aspetroleumisnotactuallysoldatthewellhead(instead,itissubjecttofurtherprocessingandrefinement),itcanbedifficulttovaluepetroleumatthewellheadforroyaltypurposes.

Themostcommonmethodofobtainingthevalueofthepetroleumatthewellheadistoobservethefirstsalepriceoftherefinedpetroleumanddeductproductioncostsincurredbetweenthewellheadandthefirstpointofsale.Thisisknownasa‘net-back’method.Applyingthenet-backmethodcanbeadministrativelycomplex,andrequiresguidelinesandagreementsbetweentheTerritoryandtheproducer.Theneedtoenterintoindividualagreementscancreateuncertainty,questionsabouttransparencyandhasledtoprotractednegotiations.

Undercurrentarrangements,producersareabletodeductarangeofcostsfromthefinalsalespricetoarriveatthewellheadvalue.Thismayincludefieldgatheringcosts(thecostsofrunningthepetroleumfromthewellintoprocessingfacilities),processing,storageandpipelinetariffsortransportationcosts(thecostsoftransportingthepetroleumtotherefineryorthefirstpointofsale),anddepreciationoffieldproductionassets.

Akeydrawbackofthenet-backapproacharisesifthescopeofdeductiblecostsistoobroadasitcantechnicallyresultinanegativevalueofthepetroleum.Thisisatoddswithavalue-basedscheme and the concept that petroleum has an inherent value.

Theimpactofnet-backdeductionsisdemonstratedbyChart13.1.AlthoughtheTerritoryimposesa10percentroyalty,theactualpetroleumroyaltyreceivedbytheTerritorysince2010islessthan4percentonthevalueofthepetroleumatitsfirstpointofsale,andhasaveragedabout2percent(thatis,thewellheadvalueiscalculatedtobesignificantlylowerthanthefirstsalesvalue).Incomparison,thehistoricalaverageeffectiveroyaltyrateis6.5percentofthefirstsalevalue.

Thisfallintotalrevenueisattributabletolowerpricesandconsequentialreductionsinproductionvolumesbutnoreductioninongoingcostsanddepreciation,whichremainreasonablyfixedregardlessofproductionvolume.Inavalue-basedschemethatdoesnotrelyonanet-backmethodtodeterminevalue,theeffectiveratewouldbeaconsistentpercentageofthevalue,regardlessofproductionvolumes,pricechangesorcosts.

Chart13.1TotalNorthernTerritorypetroleumrevenueandeffectiveroyaltyrate


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13.3 AdministrationframeworksandcurrentissuesTheDepartmentofPrimaryIndustryandResourcesissuestitlesunderthePetroleum ActfortherighttoproducepetroleumwithintheTerritory.Whenapersonobtainsatitleorlicencetheymustundertaketopayroyalties.TheTerritoryRevenueOfficeisresponsibleforadministeringpetroleumroyalties.

The Petroleum Actcurrentlycontainslimitedadministrativeandcomplianceprovisionstosupportthecollectionofpetroleumroyalties.Forexample,incomparisonwiththeTerritory’sTaxation Administration Act or Mineral Royalty Act,thepetroleumroyaltylegislationdoesnotdetailtherequirementsformakingpaymentandlodgementofreturnsandhasnoadministrativereviewprovisionsifdisputesarise.Thereisalsonoguidancefordeterminingpost–wellheaddeductiblecosts.

ThislackoflegislativedetailcreatesuncertaintyforproducersandtheTerritoryRevenueOfficeastohowandwhenroyaltyliabilitiesaretobemet.Thecurrentproject-by-projectapproachtosettlingpetroleumroyaltyarrangementshassignificantcompliancelimitations,maybelessattractivetoinvestorsduetotheuncertaintyforprospectiveproducersandislesstransparentthanamorecomprehensive,modernscheme.

13.4 PotentialreformoptionsTheGovernmentisinterestedindiscussingpotentialreformsthatwouldensurethepetroleumroyaltyschemeismoreeffectiveandsupportiveofbusinesseswhileensuringanappropriatereturntothecommunityfortheextractionofanon-renewableresource.Potentialreformoptionsare:

Converting the current scheme to a profit-based royalty schemeTherecentCallaghanReportontheCommonwealth’sPetroleumResourceRentTaxReviewnotedaprofit-basedroyaltyremains“thepreferredwaytoachieveafairreturntothecommunityfortheextractionofpetroleumresourceswithoutdiscouraginginvestment”andwith“therangeofuncertaintiesinvolvedinlargelong-termpetroleuminvestments,stabilityinfiscalsettingsisanimportantfactorinfluencinga[jurisdiction’s]investmentattractiveness”.Detailsaboutthecharacteristicsofaprofit-basedroyaltyarediscussedinthepreviouschapter.

Aprofit-basedroyaltymaybelessdistortionaryandabletobetterpromoteexplorationanddevelopment.Giventheadditionalcomplexityofaprofit-basedschemeandassociateduncertainties,Governmentisinterestedingaugingthedesireforsuchamajorreforminthecurrenteconomic environment.

Bolster legislation in respect of petroleum royalty calculation and administrationToreduceuncertaintyandavoidtheneedtonegotiateroyaltyarrangementsforindividualprojects,anotheroptionistointroducelegislationsettingoutthecalculationofroyalty,includingdetermininggrossvalueandallowabledeductions,aswellasdetailedadministrativeprovisions.

Thisoptionwouldhavetheprimarybenefitsofprovidinggreaterlegislativecertaintytoproducersinassessingtheeconomicviabilityoffutureprojects,removetheneedforlengthyroyaltycalculationnegotiationsbetweentheTerritoryandproducers,andsimplifycompliance.

Alternative methods of determining the value of petroleumInordertoreduceoreliminatetherequirementtodeductproductioncoststocalculatethegrossvalueofthepetroleum,oneoptioncouldbetoextendtheroyaltyvaluationpointdownstreamfromthewellheadtotheboundaryoftheproductionlicence,wherethepetroleumisbetterabletobevalued.Anothercouldbetodeterminevaluebyreferencetoanobjectiveorpublishedpricebasedonproductionvolumes.


Thevalueofthepetroleumcouldthenbedeterminedatthetimeofitsremovalfromtheproductionunitbasedontheactualorcomparablearm’slengthsalepricesachievedortheopenmarketpriceestablishedbyareliablecommoditiesexchange.ThisissimilartothevaluationapproachundertheTerritory’smineralroyaltylegislationandmayovercometheshortcomingsofthenet-backmethod.

Governmentisinterestedinwhetheritisappropriatetoconsideralternativemethodologiesfordeterminingthevalueofthepetroleum.AnysuchalternativewouldneedtoensuretheTerritoryreceivesafairandrelativelystablereturn,whileprovidingindustrywithadequateprofits.Analternativevaluationmethodshouldnotresultinanegativevalueofpetroleum.Principlesoftransparency,certaintyandsimplicityarealsoimportant.

Discussion questionsQ13.1Arethecurrentbroadpolicysettingsforpetroleumroyalties,basedonvalue-

basedroyaltyassessedatthewellhead,appropriate?

Q13.2Isthenet-backapproachfordeterminingpetroleumroyaltyappropriate?

Q13.3Aretherealternativemethodsfordeterminingthevalueofpetroleumthatshouldbeconsidered?Forexample,movingthepointofvaluationdownstreamorascertainingvaluebyreferencetoobjectiveorpublishedpricebasedonproductionvolumes?

November 2017 | 55

14 Otherown-sourcerevenuebases

14.1 OtherrevenuesourcesoverviewAlthoughtaxesandroyaltiesarethemainown-sourcerevenuebasefortheTerritory,theTerritoryalsoraisesrevenuethroughfeesandcharges,rentandtenancyincome(suchasmineraltenementsorpastoralleaserent),interestanddividendincome,andprofitandlossonthedisposalofgovernmentassets.

In2016-17,theTerritorygeneralgovernmentsectorraisedabout$452millionfromown-sourcerevenueotherthantaxesandmineralandpetroleumroyalties,withabout$333millionofthatfromgoodsandservicesrevenue,$33millionfromregulatoryfeesandcharges,$18millionfromfines,$14millionfromrentalincome,and$4.7millionfrompetroleumandminingrents.

14.2 FeesandchargesTheTerritoryraisesabout$33millionfromregulatoryfeesandcharges.Mostfeesandchargesareexpressedinrevenueunits,whichareindexedtotheDarwinconsumerpriceindex(CPI).Thismeansovertimethefeesraiseasthecostsofdeliveringthoseregulatoryservicesincrease.

However,CPImaynotbethebestbasisforindexingfeesandchargesbecausethecostofdeliveringservicestendstoincreasewithwagecostsandothercoststhatincreasedifferentlytoCPI.

Ideally,regulatoryfeesandchargesshouldreflectthecostofdeliveringtheregulatoryserviceandshouldreflectsimilarfeesinotherstatesandterritories.

14.3 Pastoral lease rentsPastoralleasesareatitletolandissuedfortheleaseofanareaofCrownlandtouseforthepurposesofgrazingstockandassociatedactivities.Pastoralleasesareissuedforthesepastoralpurposes,includingsomesupplementaryorancillaryuses.

Pastoralleaserentsarecurrentlysetonthebasisoftheunimprovedcapitalvalueofthepastoralleaseland,andraiseabout$5millionperannum.Governmenthasconsultedwithindustryaboutmovingtoaprocessofassessingpastoralleasesbasedontheestimatedcarryingcapacityoftheland,whichisthenumberofcattlethatcangrazeonthatlandgivenitsnaturalfeaturessuchasclimate,landtypes,plantspeciesandwatersources.

UnderrecentchangestothePastoral Land Act,lesseescannowapplyfornon-pastoralusediversificationpermits,allowingotheractivitiesonpastoralleasessuchashorticulture,aquaculture,tourismandforestryactivities,allowingpastoraliststodiversifytheirincome.Thesepermitsaresubjecttomodestannualfees.

• Significantrevenueisalsoprovidedfromvariousotherown-sourcerevenuebasesincludingawiderangeoffeesandcharges,pastoralleaserents,andmineralandpetroleumtitlerents.

• Feesandchargescouldbereviewedtoensuretheybetterreflectcostrecoveryprinciples,exceptwheresubsidiesarepreferred.

• ConsiderationcouldalsobegiventowhetherTerritoriansarereceivinganappropriatereturnfromleasinglandforpastoralandminingpurposes.


14.4 MineralandpetroleumtitlerentsMineralandpetroleumtitlesarelicencesandleasesoflandthatallowfortheexplorationforandextractionofmineralandpetroleumresourcesintheTerritory.In2011,anewMineral Titles Act commencedwiththeaimofintroducingaschemetoencourageactiveexploration,landturnover,andtheactivedevelopmentofmineraldeposits.

Mineraltitlesaresubjecttoannualrentandadministrationfeesthatmustbepaidforthetitletoremainvalid.Thefeesandrentdependonthenatureofthetitle,suchasexplorationlicences,mineralleases,extractivemineralpermitsorlicences.Thesefeesandrentareexpressedinrevenueunits and are detailed at nt.gov.au/industry/mining-and-petroleum/mineral-titles/mineral-title-fees-and-rents.Currently,theTerritoryreceivesabout$4.7millionperannumfrommineralandpetroleumtitlerentsandfees.

Discussion questionsQ14.1Arethecurrentbroadpolicysettingsforfeesandchargescorrect?Shouldfees

andchargesbereviewedtobetterreflectcostrecoveryprinciples?

Q14.2DoestheTerritoryreceiveappropriatereturnsfromleasinglandforpastoralandminingpurposes?

https://nt.gov.au/industry/mining-and-petroleum/mineral-titles/mineral-title-fees-and-rents

https://nt.gov.au/industry/mining-and-petroleum/mineral-titles/mineral-title-fees-and-rents

November 2017 | 57

15 Recentstatetaxationreforms

Governmentsregularlyreviewtheirtaxationlawsandmakeamendmentstoinfluencethedesignoftheirtaxationschemes.Someoftheamendmentscanhavelargefinancialimpactsonthecommunity(suchaschangestothetaxrateorthescopeofatax-freethresholdorexemptions)butonlyarelativelysmallchangetotheoveralldesignofthetaxscheme.

NumerousstatetaxeswereabolishedfollowingtheintroductionoftheGST,pursuanttotheIntergovernmental Agreement on the Reform of Commonwealth-State Financial Relations. This chapter providesasummaryofmorerecentstatetaxreformsinthelastfiveyears.

15.1 Majorreforms15.1.1 Australian Capital Territory major reformsTheAustralianCapitalTerritory(ACT)commencedlarge-scaletaxreformin2012,followingadetailedtaxreviewcompletedinthatyear.Thekeyoutcomesofthereformsinclude:

• abolishingstampdutyoninsuranceoverfive yearsbyreducingtherateseachyear(withgeneralinsurancereducedfromarateof10percentby2percentperyearandlifeinsurancedutyreducedfromarateof5percentby1percentperyear)

• abolishingstampdutyonpropertyover20yearsbyreducingtherateeachyear,withtheamountofthereductiondecidedineachyear’sBudgetprocess

• abolishingcommerciallandtaxandcombiningitwithcommercialgeneralrates

• increasinggeneralratesandlandtaxeachyeartocompensatefortheinsurancedutyandstampdutyforgone.

Followingfouryearsofreducinginsurancedutyrates,on1July2016,theACTcompleteditsabolitionofstampdutyoninsurance.

Stampdutyonpropertyiscontinuingtobephasedout,withstampdutyoncommercialpropertytransfersvaluedatlessthan$1.5millionabolishedfrom1July2018andtheratesapplyingtoresidentialstampdutyreducedannually.Forpropertysalesupto$500000,conveyancedutyreducedbyatleast30percent,althoughthedecreaseforhighervaluedpropertiesislesspronounced.

Forexample,dutyona$500000propertyreducedfrom$20500to$13460(a34percentreduction),whereasdutyona$1.2millionpropertyreducedfrom$62750to$56210(a10percentreduction).

Thesereformswereoffsetbyincreasestogeneralrates,whichareeasierfortheACTGovernmenttoimplementbecauseitimposeslocalgovernmentratesandthereisnoseparatelocalgovernment.

• Governmentsregularlyreviewtheirtaxationlawsandmakeamendmentstothedesignoftheirtaxationschemes.

• Thischapterprovidesasummaryofstatetaxreformsinthelastfiveyears,includingsignificantreformsintheAustraliaCapitalTerritoryandalsoinSouth Australiafollowingtheirstatetaxreviews.

• Numerousminorreformshavealsooccurredinotherstates.


Upto2016-17,residentialratesintheACThaverisen63percentforhouses(fromanaverageof$1406to$2295)and60percentforunits(fromanaverageof$847to$1352).

TheACTforecastsrateincreasesoverthenextfiveyearsof6percentperyearforcommercialpropertiesand7percentperyearforresidentialproperties.

ThesereformssubstantiallychangethetaxmixintheACTbyshiftingthereliancefromstampdutiestorecurrenttaxesonunimprovedlandvalues.

Bystagingtheabolitionofstampduty(andincreasesingeneralrates)overa20-yearperiod,theACThasattemptedtominimisethetransitionalissuesassociatedwithsuchlargereforms,althoughitmakestheprocessmorecomplicated.Furthermore,theeconomicbenefitsofthereformswillnotbefullyachieveduntilthereformsarecompleted.

Astheamountofthereductioninstampdutyandconsequentincreaseinpropertytaxesisdecidedeachyear(althoughbroaddirectionsforreformareannouncedeachfiveyears),thereisariskreformcanbedelayedorabortedwithachangeofgovernmentorasaresultofcommunityopposition.Recently,therehasbeenincreasingcommunityoppositiontotheincreasesinrecurrentpropertytaxes,eventhoughinsurancedutyhasalreadybeenabolishedandpropertystampdutiescontinuetoreduce.

Theproposed20-yeartransitionalperiodmeanscompletionofthetaxreformprocessisreliantonsuccessivegovernmentscontinuingtheprogramofreform.

15.1.2 South Australian major reformsStamp dutySouthAustralia(SA)commencedstampdutyreformsin2015-16,followingthereleaseofataxreviewdiscussionpaperearlyin2015,reducingitstaxesoncommercialproperties.TheSAstampdutyreformsfocusedonreducingthetotaltaxburdenonbusinessesinthatstatetofacilitateeconomic development and investment.

Thekeyoutcomeofthereforms,whichdonotapplytoprimaryproductionorresidentialproperty,istheabolitionofstampdutyoncommercialpropertyoverthreeyears(throughreductioninrates),withabolitiontooccuron1July2018.Stampdutyonnon-realbusinessproperty(intellectualproperty,licencesandmechanicalplant)wasestablishedfrom18June2015.

Thereformsarestatedtocostabout$200millionperannumongoingfrom2018-19,comparedtoanestimated$853millionpropertystampdutyrevenuein2016-17.UnliketheACT,theSAreformswerenotplannedtobeoffsetbyincreasesinotherkindsoftaxation.

However,subsequentreforms,detailedbelow,haveorplantoputinplacetwonewtypesoftaxationthatmaypartiallyoffsettherevenueforgonethroughthestampdutyreforms.

Betting taxesFrom1July2017,SAhasintroduceda‘placeofconsumption’taxononlinebettingproducts.Essentially,thetaxrequirescorporatebookmakerstopayataxbasedontheamountofbetsplacedbyconsumersinSA.Thisdiffersfromtheusualmethodoftaxingcorporatebookmakers,whichtypicallychargedataxbasedonthelocationofthebookmakerratherthanthecustomer.WhiletheTerritorycontinuestomaintainitsexistingtaxesonbookmakers,otherstateshaveexpressedinterestinfollowingSA’smodelforbookmaker’staxes.

Theplaceofconsumptiontaxonwageringisexpectedtoraise$10millionperannuminSA.

November 2017 | 59

Banking taxesThe2017-18CommonwealthBudgetintroducedataxondepositsheldbylargebankinginstitutions.SAhassubsequentlyintroducedlegislationtoapplyasimilartaxatthestatelevel.

SAhasproposedamajorbanklevycalculatedonthesamebasisastheCommonwealthtax,butreflectingSA’sshareofAustralia’seconomicactivity.

Atthisstage,thelegislationhasnotyetbeenpassedbytheSAParliament.Themajorbanklevyisexpectedtoraise$417millionoverthenextfouryears.

15.1.3 Western Australia major reformsPayroll taxFrom1July2018,afive-yearincreaseinpayrolltaxforverylargeemployerswillbeputinplaceforfiveyears.Thepayrolltaxratewillincreaseto6 per centonemployerswithtaxablepayrollsexceeding$100millionbutlessthan$1.5billion,andincreaseto6.5 per centonemployerswithtaxablepayrollsexceeding$1.5billion.

Itisestimatedthat8 per centofallemployerswillbeeffectedbythisandtheincreasewillcollect$435millionovertheforwardestimates.

Point of consumption wagering taxFrom1January2019,aconsumptionwageringtaxatarateof15 per centofnetwageringrevenuewillbeintroducedtoreplacecurrentarrangements.EssentiallysimilartothetaxrecentlyintroducedbySA,corporatebookmakerswillpayataxbasedontheamountofbetsplacedbyconsumersinWesternAustralia(WA).Thisisexpectedtoraise$52 millionovertheforwardestimates.

State-based major bank levy WAhasannounceditwillcontinuetoconsideralternativerevenuemeasuressuchasthebanklevyintheabsenceofmajorGSTreformoriftheWAParliamentdoesnotpassanyotherrevenuemeasures.

15.1.4 Foreign owner surcharges across statesRecently,anumberofstateshaveintroducedstampdutyandlandtaxsurchargesonforeignbuyersorownersofresidentialland.Thistypeoftaxreformincreasestheoveralltaxburden,butcanachievemultiplepolicygoals,includingasatooltomanagedemandinlocalpropertymarkets.

Insomerespects,thesereformsrepresentanewkindofstatetaxation,asstatetaxestypicallydonottakeintoaccountthecharacteristicsofthetaxpayerinsettingthetaxrate,otherthanwhenprovidingconcessionaltreatment.

From1July2015,Victoriaintroduceda3percentstampdutysurchargeonforeignbuyersofresidentialproperty,andthissurchargewasincreasedto7percenton1July2016.Forthe2016landtaxyear,Victoriaalsointroduceda0.5percentabsenteeownersurchargeonlandtaxrates.Thelandtaxsurchargewasincreasedfrom0.5to1.5percentforthe2017landtaxyear.

NewSouthWalesintroducedasimilar4percentstampdutysurchargeonforeignbuyerson21June2016,anda0.75percentlandtaxsurchargeonforeignlandholders.Thestampdutysurchargewasincreasedto8percenton1July2017.

Queenslandalsointroducedasimilar3percentstampdutysurchargeonforeignbuyerson1October2016.SAwillintroducea4percentforeignbuyerstampdutysurchargeon1January2018andWAwillintroducea4percentforeignbuyerstampdutysurchargeon1January2019.


15.2 Otherreforms15.2.1 New South Wales reformsAsummaryofkeyreformsinthepastfiveyearsincludes:

Payroll tax • Increasedthetax-freethresholdto$750000andremovedindexationofthethresholdfrom2013-14.

• IntroducedaJobsActionPlanrebate(2011-12),withprogressiveincreasestoprovideupto$6000forthehiringofadditionalemployees.Theschemewasalsotargetedatrecentlyretrenchedemployees(2014-15)andlimitedtobusinesseswithlessthan50employees(2016-17).

Stamp duty • Introduceda4percentsurchargeonforeignbuyerson(2016-17),increasingto8percenton1July2017(2017-18).

• Abolishedstampdutyonnon-landbusinessassets,unquotedmarketablesecurities,andmortgageduty(2016-17).

• Introducedexemptionsandconcessionsforfirsthomebuyersofnewandexistinghomes(uptoan$800000homevaluethreshold).

• Introduced(2012-13)andamended(2017-18)theNewHomeGrant,whichfrom1July2017providesa$10000grantforbuildingorpurchasingaanewhomeupto$750000.

Land tax • Introducedasurchargeof0.75percentonforeignownersin2016,increasingto2percent

in 2018.

• Introduced,butdeferredtheintroductionofanEmergencyServicesLevy(anddeferredthecorrespondingabolitionofinsuranceduty).

Insurance duty • Abolishedlendersmortgage,cropandlivestockinsuranceduty(2017-18).

• Exemptedbusinessvehicle,aviation,occupationalindemnity,andproductandpublicliabilityinsuranceforsmallbusinesses.

• Introduced,butdeferred,amendmentstotheEmergencyServicesLevyoninsurance.

November 2017 | 61

15.2.2 Victoria reformsAsummaryofkeyreformsinthepastfiveyearsincludes:

Payroll tax • Tax-freethresholdwillprogressivelyincreasefrom$550000to$650000by2018-19.

• Payrolltaxratereducedfrom4.9to4.85percent(2014-15).

• Introduceda‘backtowork’payrolltaxrebate(2015-16)andrebatefordisplacedtraineesandapprentices(2016-17).

• Introduceda25percenttaxconcessionforregionalbusinesswhereatleast85percentoftheirpayrollgoestoregionalemployees(2017-18).

Stamp duty • Introducedaforeignbuyersurchargeof3percentin2015-16,increasingto7percentin2016-17.

• Increasedfirsthomebuyerconcessionsandexemptionsprogressively,withexemptionsandconcessionsofferedforpropertiesvaluedupto$750000.

• Limitedfirsthomebuyergrantstonewhomesonlyandincreasethegrantto$10000,or$20000forregionalhomebuyers(2017-18).

Land tax • IntroducedaFireServicesLevy(withafixedandvariablecharge)onlandtoreplacechargesoninsuranceproducts(2013-14).

• Introducedanabsenteeownerlandtaxsurchargeof0.5percentinthe2016landtaxyear,increasingto1.5percentin2017.

• Introducedsurchargesonvacantresidentialproperties(2018landtaxyear).

• Expandedcongestionleviesonparkingspacesintheinnercityandsurroundingareas(2013-14and2014-15).

• Introducedsurchargesondevelopmentapplicationsforconstructionprojectsover$1million.

Insurance duty • Abolishedlifeinsuranceduty(2014-15).

• Abolishedinsurancedutyoncrops,livestockandagriculturalmachinery(2017-18).

Motor vehicle taxes • Increaseddutyratesby0.2percent(2014-15).

• Increasedregistrationfeesby$35(aboveindexation;2014-15).

Gambling taxes • Reducedwageringtaxesinlinewitharenegotiatedwageringlicence.

• Gamingmachinetaxratesandstructureredesignedin2012-13andincreasedin2014-15.Playerreturnreducedin2014-15from87to85percent.

• Casinotaxesprogressivelyincreasedto32.57percentin2014-15.Casinosupertaxthresholdsareindexedandincreaseovertime.


15.2.3 Queensland reformsAsummaryofkeyreformsinthepastfiveyearsincludes:

Payroll tax • Tax-freethresholdincreasedto$1.1million(2012-13).

• Introducedandincreasedrebatesforapprenticesandtrainees(2015-16).

• IntroducedarebatefornewcompaniesthatsetupinQueenslandaspartofAdvanceQueenslandresearchprograms(2015-16).

Stamp duty • Introducedaforeignbuyersurchargeof3percent(2016-17).

• Retargetedfirsthomeownergranttonewhomesonly,increasedto$20000until2018.

Land tax • Introduceda1.5percentabsenteeownersurcharge(2017-18).

• Expandedtheurbanfirelevytofundemergencyservicesthroughanemergencyserviceslevy(2014).

Insurance duty • Increasedinsurancedutyforclass1and2insuranceproductsto9percent,from7.5and5percentrespectively(2013-14).

Gambling taxes • Variousincreasestogamingmachine,casinoandhealthservicestaxes(2012-13).

• Renegotiatedwageringtaxagreement,withageneraldecreaseintaxrates.

Motor vehicles taxes • Registrationfeesinitiallyfrozenforoneyear(2012-13)butlaterincreasedby3.5percent(2017-18)andindexed.

15.2.4 Tasmania reformsAsummaryofkeyreformsinthepastfiveyearsincludes:

Payroll tax • Tax-freethresholdincreasedto$1.25million(2013-14).

• Employmentincentiveschemesprogressivelyimplemented,providingconcessionstoemployerswhocreateandmaintainnewemploymentpositions.

• Introducedarebateforapprentices,traineesandyouthemployeesbetween2017and2019.

Stamp duty • Conveyancedutyratesandthresholdsincreased(2012-13).

• Firsthomeownergrantincreasedandretargetedtonewhomesonly.Temporaryboostgrantsintroducedandextendedprogressivelytoacombinedtotalof$15000.

Insurance duty • Insurancedutyratesincreasedfrom8to10percent(2012-13).

Motor vehicle taxes • Motorvehicletaxincreasedby20percent(2012-13).

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15.2.5 Other ACT reformsOtherreformsintheACTinclude:

Payroll tax • Increasedthepayrolltax-freethresholdfrom$1.75million(2011-12)to$2million(2016-17).

Stamp duty • Introducedadeferredstampdutyschemetoallowstampdutytobepaidafterapropertyistransferred.

• Retargetedstampdutyconcessions,includingincreasingthethresholdfortheHomeBuyerConcession and Pensioner Duty Concession Scheme.

• TemporaryincreasestotheFirstHomeOwnerGrant(returningto$7000in2017-18)andretargetedtonewhomesonly.

• Introducedastampdutydiscountforlow-emissionvehicles(2015-16).

15.2.6 Other SA reformsOtherreformsinSAinclude:

Payroll tax • Introducedatemporarypayrolltaxrebateforsmallbusinesses(2013-14),followedbyareductioninthetaxrateforsmallbusinessesto2.5percent(2017-18).

• Removedpayrolltaxexemptionsforapprenticesandtrainees,replacedwithdirectassistanceschemes.

• IntroducedaJobAcceleratorGrantSchemetobusinessesthatemployadditionalstaff.

Stamp duty • Providedstampdutyconcessionsforinnercityoff-the-plandevelopments(2013-14).

• Firsthomeownergrantschemelimitedtonewhomesandincreasedto$15000,withadditionaltemporaryhomepurchasegrantsprovided.

• Introducedan$8500seniorhousinggrant(2014).

Land tax • Introducedalandtaxexemptionforoff-the-planpurchases.

Gaming taxes • Casinolicencerenegotiatedandtaxratesadjusted(2014).

15.2.7 Other WA reformsOtherreformsinWAinclude:

Payroll tax • Tax-freethresholdprogressivelyincreasedto$850000andataperingthresholdupto$7.5millionwasintroduced(2015-16).

• One-offrebateforemployerswithAustralia-widegroupwagesofupto$1.5million(2013-14)providedtooffsetpreviousyear’spayrolltaxliabilities.Rebatephasesoutforemployerswithwagesbetween$1.5millionand$3million.

• ExemptionsprovidedforwagespaidtonewemployeeswithadisabilityorAboriginalemployees(2012-13).


Stamp duty • Increased home buyer stamp duty concessions.

• Firsthomebuyergrantincreasedto$10000andprogressivelylimitedtonewhomes(2015-16).

Land tax • Progressivelyincreased,withvariouschangesmadetovaluescalesandtaxrates.

• Parkinglevyincreasedincrementally.

• ExpandedtheMetropolitanRegionImprovementTaxtoregionalareas(2016-17).

Gaming taxes • Variouschangestoracingbetslevy,subjecttooperatorturnover.

• Gamingmachinetaxesprogressivelyincreasedto21.5percentby2015.

Motor vehicles • Privatevehicleregistrationconcessionprogressivelyreduced,andabolishedby2014.

Documents

Northern Territory Revenue - Revenue Discussion Paper · 3 Structure and limitations of Northern Territory revenue sources 5 ... of its revenue from the Commonwealth Government,