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1999-2000 Northern Territory Budget

Key Revenue Measures

A number of key revenue measures have been announced within this Budget. Reform of the Territory’s payroll tax system is the major revenue measure in this Budget. A number of other revenue related measures also warrant comment.

• Payroll Tax Reform

• Introduction of "Revenue Units"

• Cessation of Certain Liquor Subsidies

• Revision of certain Fees & Charges

Payroll Tax Reform

The Territory’s current payroll tax framework is in need of change. It is narrowly based and administratively cumbersome. All other jurisdictions have moved to include fringe benefits and (except Queensland) employer sponsored superannuation contributions in their tax base. By contrast, the Territory’s capacity to tax benefits and superannuation contributions is limited and the lack of legislative clarity has lead to uncertainty for both taxpayers and administrators.

The narrow base has also lead to the Territory imposing the highest tax rate in Australia and a relatively low tax-free threshold. Furthermore, the current rate and general exemption regime is complex to administer and causes inequities where a marginal increase in wage levels pushes wages into a higher rate tier. When faced with these inequities, employers may face a disincentive to increasing employment.

This Budget introduces a number of reforms to significantly improve the system with effect from 1 July 1999. The key elements of the reform package involve:

	-	broadening the payroll tax base to include fringe benefits and superannuation contributions;
	-	replacing the existing three tiered rate and reducing general exemption regime with a single rate and flat general exemption regime;
	-	reducing the top rate of payroll tax from 7% to 6.75%;
	-	increasing the general exemption from $520,000 to $600,000;
	-	reducing the impost for small to medium sized employers, particularly those which operate exclusively in the Territory;
	-	reducing compliance and collection costs and providing greater certainty for all employers by aligning the Territory regime more closely with other jurisdictions to provide a more consistent basis for administering payroll tax; and
	-	maintaining broad revenue neutrality.

The broadened base enables the tax-free threshold to be increased and the rate reduced meaning it is no longer the highest rate in Australia.

The reform measures will particularly benefit small to medium sized employers (taxable wages of less than $3M) operating exclusively in the Northern Territory. Payroll tax reductions are expected for 87% of all taxable employers operating exclusively in the Territory. There are some 240 such employers who will share in tax savings of approximately $1.7M. The average reduction in payroll tax for many of these employers is in the order of 15%.

The measures will also result in reduced payroll tax for many small to medium employers who operate in the Territory and other jurisdictions. For a handful of employers, payroll tax will no longer be a liability based on their current wage levels.

The measures operate on a broadly revenue neutral basis. Thus for the above "winners" there must also be some "losers". The additional burden falls upon large employers with wages exceeding $3M (that is, approximately 75 or more employees). The impacts are most significant for employers with wages in the range of $5M to $12M.

For all businesses, the new measures will provide greater certainty as to the taxable status of various employee remuneration benefits. Furthermore, the Territory is characterised by businesses operating in a number of jurisdictions. The current difference between the Territory’s narrow payroll tax base and the other jurisdictions has lead to additional compliance costs and uncertainty. The reformed payroll tax base will also align far more closely with other jurisdictions which promotes greater consistency together with lower compliance and administrative costs for employers, particularly those operating in a number of jurisdictions.

A number of minor amendments are also proposed to improve certain administrative processes currently required by the Act. In addition to the legislative measures, the Commissioner of Taxes is considering reforms to improve and simplify the administrative machinery for the collection and processing of payroll tax payments and information.

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Cessation of Certain Liquor Subsidies

Under arrangements made following a High Court decision in August 1997, special liquor subsidies have been available to certain liquor outlets, classified as clubs and roadside inns, as a means of preserving the concessional tax treatment previously enjoyed by these outlets.

About 100 such outlets are entitled to claim the special subsidy. Four categories of special subsidy operate to reflect the differing tax treatment which previously applied to clubs (the tax rates varied according to the amount of alcohol purchased) and roadside inns (the tax rates depended on whether the inn had access to government utilities or not). The subsidy is calculated by reference to the amount of wholesale sales tax borne by the outlet on their purchases of alcohol.

For small, medium and large sized clubs, the annual average subsidy is about $1 300, $3 440 and $8 160 respectively.

From 1 July 1999, the special subsidy will be limited to roadside inns which are not connected to mains power, and will cease for other outlets. For roadside inns, this preserves the original intent of providing assistance to outlets operating without the benefit of mains electricity, generally in remote areas. For clubs, the removal of the concessional treatment restores the competitive balance with other liquor outlets.

It is anticipated that this measure will affect approximately 75 outlets and provide annual savings to the government of $0.45M.

The general liquor subsidy that is available to wholesalers in respect of low-strength liquor is not affected by these changes.

Introduction of "Revenue Units"

Existing fees and charges are established under a wide range of statutes administered by many agencies. This has created a number of anomalies where fee and charge levels have not been consistently updated.

As part of a broad reform of fees and charges, Territory fees and charges will, where appropriate, be represented as a "revenue unit" to replace the existing monetary amounts. That is, those fees and charges will be expressed as a number of revenue units in the various statutes, and the value of a revenue unit will be ascribed in separate legislation.

The introduction of the "revenue unit" will provide a simplified process for updating the charging levels. That is, fees and charges can be globally and consistently updated by amending the quantum of the revenue unit. This will assist in maintaining the real value of the fees and charges.

Revision of Certain Fees & Charges

A number of fees and charges are due for review. Some of these have not been revised for many years and it is appropriate they reflect current charging levels. For example, the following charges will rise (and the full-year impact):

 

	-	certain court charges imposed by the Office of Courts & Administration, such as Magistrates Court fees for filing, issuing and serving summons; and Sheriff’s Office fees for receiving, entering and serving writs ($1.6M);
	-	certain land titles search and trade measurement fees ($0.2M);
	-	various application and approval charges imposed by the Department of Lands, Planning & Environment ($0.03M);
	-	plant design and licensing fees imposed by the Work Health Authority ($0.04M);
	-	certain miscellaneous charges imposed by PAWA. In addition, cost reflective fees will be introduced for certain recoverable services ($0.7M);
	-	various fees imposed by the Darwin Port Authority for pilotage, berthage and pilot exemption certificates ($0.2M);
	-	certain charges imposed for the provision of police reports ($0.1M); and
	-	certain charges imposed by the Department of Primary Industry & Fisheries, such as fees for water analysis, export and diagnostic testing charges ($0.05M).

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