COMMERCIAL AND INDUSTRIAL PROPERTY TAX REFORM BILL 2024

Second Reading

Danny O’BRIEN (Gippsland South) (15:01): I am pleased to rise to speak on the Commercial and Industrial Property Tax Reform Bill 2024. I can perhaps assist the member for Box Hill in completing his sentence and highlight that the objective of this legislation is to change the stamp duty charges for commercial and industrial property and effectively remove stamp duty on commercial and industrial property and change it over a 10-year period to a CIPT – a new government charge. It is a very complicated, I might say, process that the government has outlined which will introduce the CIPT – the commercial and industrial property tax – which in theory I am very strongly supportive of. Stamp duty is a very regressive tax, a very uneconomic and inefficient tax, and in particular in the housing sector it reduces the opportunities for people to move and the liquidity of the housing market because of the disincentive that is provided by stamp duty. As a principle I certainly do not oppose this legislation, but even the member for Box Hill ran out of time to explain the context and the content of this legislation and exactly how it will in fact work, because it is quite complex.

There are a couple of things that concern me about the way the government is proposing this. In simple terms, from 1 July this year, which is I must say a very short turnaround time for this legislation to be implemented – given this reform was announced in the budget last year, one does wonder why it has taken so long for the legislation to come before the Parliament and then have a less-than-two-month turnaround time, assuming it does go through the other place next week – the intention would be that any purchasers of commercial or industrial property will pay stamp duty for the final time, and they will have the opportunity to either pay it in a lump sum or take up a loan from the government to pay it over a 10-year period. But after 10 years from 1 July, any such commercial and industrial property transactions will not have stamp duty but will find the commercial and industrial property tax levy payable.

One of the issues that I have with that is that there is a significant aspect of double taxation within the arrangements, because if there is a property sold within that 10-year period – so let us say we have a property sold in August this year – the purchaser of that property will pay the stamp duty either as a lump sum or over a 10-year period, but if they sell it again to somebody else, that person will be liable for CIPT. That is how it works in favour of the industry. But if that person holds on to that property for 10, 15 or 20 years, which I might say is the case in general for property investors – they do not tend to buy something and sell it again two or three years later; they tend to buy it as a long-term investment – then that person will not only pay stamp duty but end up paying the CIPT as well after 10 years and ongoing at a rate of 1 per cent of the unimproved land value of the property they have purchased. That is where there is a significant double taxation situation here. I am sure that that is how the Treasury has designed it given Victoria’s parlous financial state, because we have seen this done in at least one other state, and that was South Australia, where commercial stamp duty was abolished in 2018, but in South Australia they abolished stamp duty on commercial and industrial property and did not introduce another tax. Sadly, as we all know, Victoria is in no position to do that because of the way this government has managed the budget over the last 10 years. We still have a deficit and we are facing $178 billion in debt that will come at a cost to service of around about $12 million a day, so clearly the government did not have the opportunity to abolish the tax altogether. So there are some issues with that.

I also support the member for Sandringham’s position on the 1 per cent tax rate for unimproved land value for the CIPT. The government has been unable to explain why it has set the rate at that level and how that is fair and has indeed left that to the bill, simply expecting to rake in the revenue at that level. So I support the member for Sandringham’s amendment to reduce that level, because the government has not given any indication as to why that should be the rate. The other aspect that I am concerned about when it comes to that rate is that while there are currently stamp duty concessions for commercial and industrial property transfers in regional Victoria they will be abolished under this bill and there is no regional exemption under the CIPT, so effectively what was an encouragement, an incentive, for people to invest in commercial and industrial property in regional Victoria is being abolished by the government in this bill and will no longer apply. That is something that I am always concerned about. It is I think quite sneaky of the government to remove that concession in this way. This legislation highlights the –

Kathleen Matthews-Ward: On a point of order, Acting Speaker, I am not sure if that is factual about abolishing the stamp duty concession in regional areas. I understand it continues.

The ACTING SPEAKER (Jackson Taylor): That is a matter for debate. There is no point of order.

Danny O’BRIEN: That is not a point of order, but it also is not correct, because this bill is abolishing commercial and industrial property stamp duty, so by definition the concession that regional Victorians currently get on commercial and industrial stamp duty is being abolished. It is being replaced by a CIPT that does not have a concession for regional Victoria. Perhaps members opposite should understand the bill a little bit better. They might go and talk to the Treasurer’s office and find out.

On this legislation, while, again, I support the principle involved of getting rid of stamp duty, I do have a concern about the complexity of it. It is yet another change. Given the double taxation estimate that I have outlined here, it again highlights the mess that the government has got into when it comes to taxation and property. We have seen this repeatedly over the last couple of years. We know that the state government has introduced or increased 53 taxes – so there have been 53 new or increased taxes since it came to office – and more than half of those are on property. Whether it is the windfall gains tax, whether it is land taxes, whether it is absentee landholder taxes – and we have been hearing noises this week about a new universal property development tax – all of these simply add to the cost of housing. They simply add to the cost of property more broadly but in particular housing.

It is no surprise to hear that the Procore–property council survey for the last three months, which was only released a couple of weeks ago, indicates that confidence within Victoria’s property industry is faltering, significantly trailing behind the national average. Indeed the update from the property council indicated that Victoria was the only state to record negative expectations for economic growth over the next 12 months, sitting at minus 23, with zero being neutral. But particularly with respect to industry confidence, Victoria was the exception to the national trend, with the industry confidence index falling to 104 points, well below the national average of 120.

Some of those opposite and certainly their fellow travellers in the Greens will say, ‘Oh, well, that’s just the rich greedy property developers.’ What they fail to understand is that they are the people that build homes for people. They are the people who provide homes for Victorian families to buy and for Victorian families and singles to rent. It is lost on this government time and time again that if you continue to increase taxes on property it will simply be passed through to the end user – whether that is people buying their first home, their second or third home, their family home, or whether that is renters. I am bemused that this legislation has a prohibition on passing on the tax to tenants. That simply does not show an understanding of the commercial reality of what will happen in the market. I think the government continues to mess up tax reform. This is in principle a good way to go, but I am concerned that the government has made it far too complex.

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