Thursday, 2 November 2023

State Taxation Acts and Other Acts Amendment Bill 2023

Second reading

Debate resumed on motion of Jaclyn Symes:

That the bill be now read a second time.

Evan MULHOLLAND (Northern Metropolitan) (14:41): The concerning thing about this bill is that it was one of the first acts of this newly reset government, the Allan Labor government, that they introduced two new taxes. But I first want to comment on the Greens, actually, and I want to comment on the pickle the government finds itself in. You have a Greens political party making extraordinary demands. One of them is a rental freeze that is supported by no economists and that is supported by no real-world evidence, from what we have seen. You have got them making demands to delay the public housing changes, which I am sure Ms Shing would be very interested in – delay or permanently put them off – and you also have the Greens putting forward today some wacky Big Brother-style system where they would force every Victorian to give over their data to the government about who is living in their home. That is what the Greens have come up with today. These further measures will only punish Victorians at a time when they can least afford it, drive critical investment interstate and worsen Victoria’s housing affordability crisis.

Harriet Shing: At least we’re listening to what you have to say.

Evan MULHOLLAND: I am glad. I will take the interjection, and I will say I am glad, because when you have got the Greens’ crazy proposals versus perhaps just putting this bill to one side, I would put the bill to one side, because when you look at it in its entirety it is not going to raise nearly enough revenue to fill your budget black hole. In fact compared to other measures it is quite minuscule.

So when faced with your predicament – and it is a predicament; we have seen the media briefing, we have seen that you are stuck between dropping the bill and dealing with the Greens – I actually want to offer the government some practical suggestions that the opposition has made, some issues that the opposition has with this bill. We have spoken to industry, stakeholders and investors. Indeed I have spoken to developers in my electorate, and I want to point out particularly with multistage developments and land – this would be the vacancy tax that applies to undeveloped land as part of the State Taxation Acts and Other Acts Amendment Bill 2023 – consideration should be given to multistage developments, land requiring mediation, delays to development outside the control of the owner and delays to building permit issues due to unanticipated post-permit controls. So if you have got a development and you have got five stages of development, it is very impractical to build it all at once and in fact very uneconomical to do so. But you might have a stage – and I say this sincerely to the government: look at this bill – in a lot of your electorates where you have got five parts to a development. They cannot build it all at once, and the unintended nature of the bill is that the government will in turn charge perhaps the last two parts of that development extra land tax, even though there are already plans underway to develop that land.

The government should have a look at that and reconsider it. When they adjourn it off, perhaps they can take a good look at that part. The government should also consider including exemptions for holiday homes owned by a company, association, organisation or self-managed super fund. Also consideration should be given to the application of the vacant residential land tax to off-the-plan apartment sales, which can at times take a significant period of time despite being actively on the market for sale. The proposed five-year time line – this is the tax on undeveloped land – should commence when the land is ready for development and also give consideration to the local government permit process and all sorts of other delays that are caused by perhaps Melbourne Water, cultural heritage assessments and other things of that nature. I am just hopefully making some helpful suggestions for the government to ponder when they adjourn this off and take a good look at it. You can take the Greens’ suggestions, which will kill investment in Victoria, or you can have a good, long, hard think about the nature of this bill. I think it is a bad bill. My colleagues think it is a bad bill. But I would say that the Greens’ demands will make the housing crisis worse. I think this bill will deter even further investment in Victoria, but the Greens’ amendments will stop investment in housing in Victoria. It is a pickle that you are in.

I also think it would be beneficial if the government were to be transparent, and we have seen them do it in a number of other ways, reviews et cetera. The government might wish to publish the anticipated uplift in housing stock as a result of this bill’s introduction and passing, because that is supposedly the intent of this bill. Perhaps the government could in a transparent way publish and review the uplift of housing stock as a result of this bill if it were to pass. That would be very interesting to see.

In recent times this Labor government have outdone themselves. They have been not just announcing new or increased taxes every two months but announcing new or increased taxes every week. We saw that with this floated consideration that they would apply the GAIC, the growth areas infrastructure contribution, to everyone across Victoria. We know this government like to say they are a tight ship and it is our side or whatever that is leaky. But you had two separate cabinet ministers leaking that it was being discussed that they were planning to expand a tax to the whole state of Victoria. The government is not doing a very good job at that tax, considering the GAIC has about half a billion dollars in revenue sitting in Spring Street coffers and you have not spent it in 2½ years.

At the time I called this out, Daniel Andrews was like, ‘We can’t get it out the door, because we take careful consideration on projects. We work with local councils to deliver projects. We take the time to do it.’ But I know for a fact the government has been quick in writing letters to councils saying ‘What do you want?’ in the past month – which means his defence at the time they were not even doing. They were not even consulting with the community or councils as to what they wanted. I would rather see a situation where that GAIC money that comes from developers and people buying in actually goes to the infrastructure as communities are being built so you do not end up with another Kalkallo, so you do not end up with deserts of housing estates, as we have seen, with no duplications of roads, no bridges, no bus stops and no public transport networks to these places.

Since the government delivered the budget earlier this year, we have had a new schools tax, a new rent tax, a new jobs tax, a new health tax and a holiday and tourism tax. The remarkable thing about these two taxes is that they were introduced just days after the government put forward the housing statement and signed a housing affordability partnership that said they would work closely with the people they were supposedly working with on the housing statement. And Pallas introduced it at an industry breakfast. I can only imagine the accolades he was expecting to receive, but I suspect – I know – it did go down like a lead balloon. Cath Evans, the executive director of the Property Council of Australia’s Victorian division, said she was shocked at Mr Pallas’s comments and noted the government made no mention of the plan when it jointly signed an affordability partnership with the sector just two weeks earlier. Following that announcement, journalists waited patiently for him to turn up for his scheduled 11 am appearance in the morning on Tuesday, and he did not actually turn up. Maybe he had already checked out and was thinking about early retirement, as we might have heard. They waited until midday, when the Parliament resumed, and he did not turn up at midday either. Question time came and went. It was only at around 3:15 pm, with his tail between his legs, that he showed up to the doors and answered questions that journalists had. They had been waiting there since about 7:45 in the morning. We know why he did not turn up – because he knew these taxes would punish Victorians and impose a cost on Victorians when they can least afford it.

It is quite clear that the government has failed to consult with stakeholders. You had several of the people who had signed the housing affordability partnership saying that it was already in tatters. In the housing statement there are a lot of pages, I noticed, that literally say ‘Intentionally left blank’. There are a lot of flashy photos and things like that, but it is clear there is a secret chapter to the housing statement – the taxes chapter – because we see they are pondering expanding the GAIC and taxing housing even further, and we see it with this bill, which was not part of the housing statement. So my question is: what more taxes do you have planned on the property industry? If your intention is to build more homes, taxing property is not the way to do it.

This government think taxation is the answer to the problems they have created – to pay for their mistakes, cost blowouts and overspending that they have become accustomed to for over a decade. With this bill they are introducing the 51st and 52nd new or increased taxes that they have imposed upon the Victorian people since they were elected and since they promised there would be no new taxes. Victorians are already subject to the highest taxes and the highest property taxes in Australia. In the absence of a detailed plan to end waste and better manage spending, Victorians can have no confidence that any of the revenue raised for new taxes will assist with the housing crisis.

The purpose of this bill is to expand the vacant residential land tax, currently applied to residential properties in Melbourne’s inner and middle suburbs empty for more than six months, to unoccupied residential properties across the state. It is also to tax residential land that has been undeveloped for more than five years in established areas of Melbourne, with the intent to discourage long-term land banking and the intent to encourage new housing development. I have certainly spoken to a lot of the industry that reckon that that point could be much more targeted on discouraging long-term land banking, because currently it is a catch-all. As I was saying, if you have got a development that needs to be sequenced, that needs to be done in four or five parts, it is uneconomical to build it all at once, and there probably are not the labour and supplies in this state to do that, because we know they are all being sucked into the Big Build. There are much better ways that government could be more targeted, and when they adjourn it off that might be something to take a look at, rather than signing up to the Greens political party’s radical agenda. I know the government likes to work with the Greens quite a bit, but on this one it will have dire consequences for people getting into the housing market.

The bill contains a raft of other minor and technical changes. It boggles the mind that Labor’s solution to the housing crisis is just more taxes – but not surprising. Their so-called housing statement does nothing to address the key issues causing Melbourne’s housing crisis. New taxes on property will only push the dream of home ownership further out of the reach of Victorians. Ever-increasing taxes will do nothing but drive critical investment in housing supply interstate, placing additional costs on property. The Labor government should be reducing taxes to make homes more affordable. The story of taxation under this government is a sorry one. Since Labor was elected nine years ago, Victoria is set to double the tax take, and the Labor government has introduced more than 50 taxes – now 52 taxes. They have got their half century; they are going for a century. No government in history has ever taxed its way to prosperity, not one, yet the Andrews government has on average introduced a new tax or increased an existing tax every two months since 2014, after promising not to do it.

The Liberal and National parties are opposed to Labor’s schools tax, jobs tax, rent tax, health tax and potential holiday and tourism tax. These are all taxes on aspiration and all taxes on a fair go. We are committed to repealing Labor’s schools tax should we win the next election, and we want to do more to help reduce these costs for Victorian singles, families, businesses and communities. It is actually why we have released a discussion paper on tax reform. We want to make sure the lives of Victorians are getting easier, not harder. We have released a discussion paper on tax reform because we want to be a propositional opposition, and I know my colleagues Brad Rowswell, the Shadow Treasurer, and Jess Wilson, the Shadow Minister for Finance, have been going all around town speaking to businesses, speaking to small businesses, speaking to big businesses, speaking to community organisations and speaking to non-profit groups about how the tax system can work for them going forward.

If we come to government in 2026, we are going to be left with a big mess to clean up, and we want to have a positive vision for the tax system in our state. I held our tax discussion paper forums in a number of locations, one in Preston with North Link, the advocacy group, and I actually held one in Wallan in my electorate, right near a member for Northern Victoria’s office. I held a tax discussion forum in Wallan with local businesses, who very much enjoyed contributing to and having a discussion about tax in Victoria and the impediments to growth for their businesses. The Shadow Treasurer Brad Rowswell was very warmly received by locals in Wallan, and he was very warmly received by North Link as well, which is an economic advocacy peak body in the Northern Metropolitan Region.

I could go on to a number of things, but I can say to the government –

Members interjecting.

Evan MULHOLLAND: Well, I am very happy to keep going. I am absolutely very happy to keep going, and I might go on to payroll tax, actually. There is payroll tax that the Victorian government has increased at an additional rate of 0.5 per cent. It will apply to businesses with national payroll above $10 million, and businesses with national payrolls above $100 million will pay a further additional 0.5 per cent. This surcharge will apply for 10 years until June 2033. The Victorian government is taxing jobs and encouraging businesses to invest and employ in other states, so much so that the Labor Premier of South Australia is encouraging Victorian businesses with open arms to come to his state, where seemingly it is much easier to invest, it is much easier to employ people and it is actively targeting investment from Victoria. As I said, you cannot tax your way to more jobs. You cannot tax your way to prosperity.

Then there is the rent tax. The Victorian government has increased property taxes, and that will of course mean higher rents for Victorians. For many properties, land tax has increased from $275 to $975 a year. This will be a tax on renters and actively discourage investment in housing. The increase in land tax will be passed on to tenants. I speak to a lot of real estate agents in my electorate, and they tell me since the introduction of new land taxes appraisals are up. In a lot of places they are up by around 25 per cent. What that means is that people are getting out of the property market. People are feeling that it is an insecure investment. In fact my research and consultation indicates what other peak bodies do and research institutes do, which is that about one in four property owners are getting out of property investment. It is very easy to say, ‘Well, they’re just rich landlords.’ Well, your average landlord is a person or is a family on an average income of about $100,000 a year who have invested in property to set themselves up for the future, and instead of encouraging that investment this government demonises that investment.

Then there is the holiday and tourism tax, where the government is seeking to impose a holiday and tourism tax by applying a short-term rental accommodation tax. This could add over $100 to the cost of a weekend away by charging consumers of short-stay accommodation at a rate of potentially 7.5 per cent. The Victorian government is taxing Victoria’s tourism industry and making it harder for regional communities to attract tourism and business, adding yet another tax to Victoria’s nation-leading property taxes. It will only drive investment away from Victoria. I think the government might be having a second look at that particular tax after the High Court decision, because it is a tax directly on consumers, and perhaps they might be getting that advice that they might not be able to proceed with that particular tax. I do not know.

Then there is of course the health tax. The Victorian government is taxing general practitioners, which will add costs to patients, threaten universal health care in Victoria and make it more difficult for communities to gain access to comprehensive health care when they need it. Labor’s health tax will cause GP clinics to close – we have heard around 30 per cent will close – and add considerably to out-of-pocket costs, and it will end bulk-billing as we know it. Now the Treasurer has come out and said, ‘Well, if you’re going to close, let me know, and I will see if I can waive it.’ If they are on the verge of having to close, surely they are making decisions about bulk-billing as well, which means the practical effect is to end bulk-billing.

I was chatting to a GP from the electorate of Greenvale. A number of them came to Parliament for our meeting with my colleague Ms Crozier. GPs in Greenvale are saying that this health tax will have absolutely dire consequences and will flood emergency rooms because people will not be able to afford to visit a doctor. This is the end effect of what they are doing. The people who will suffer most are in working-class areas where people are desperately struggling with the cost of living. The government’s response is to tax health and to tax GPs, which will ultimately hurt Victorians that can least afford it. It is shameful.

Do you know who else thinks it is shameful? Mark Butler, the federal health minister, who has given some strong words against the government’s health tax. The government did not really want to comment on that today, unsurprisingly – a comrade breaking ranks and criticising his own side. But we did see the federal health minister criticise his own side, criticise the rabble down here in Victoria, for taxing health. This will have a dramatic impact on people going to the hospital, and it will end bulk-billing as we know it.

My colleague Ms Crozier was out in Mulgrave the other day visiting a GP clinic there. People in Mulgrave are very worried about what this will mean for bulk-billing – very worried. As they have a right to be, because the government originally said, ‘Oh, nothing’s changed,’ but it clearly has changed. The Treasurer basically admitted it has changed in his response to GP groups in his letter, which also said he could just waive it if you were going to close – ‘Let me know.’ If they are getting to that decision of closing their clinic, they are obviously making decisions around bulk-billing as well.

This is a bad bill. This is a very bad bill. I actually wanted to speak to my reasoned amendment, which I am happy to have circulated. I move:

That all the words after ‘That’ be omitted and replaced with ‘this bill be withdrawn and redrafted to:

(a) take into account consultation with key housing industry stakeholders on the impact of this bill; and

(b) ease cost-of-living pressures to ensure every Victorian has the best opportunity to enjoy the social and economic benefits home ownership provides.’.

As I was saying earlier, colleagues, you have a choice. You can drop this bill, or you can deal with the radical suggestions from the Greens political party that will kill investment in Victoria: rent caps, rent freezes and wacky Big Brother style schemes that would make all Victorians hand over the data of who they are living with and who is living in their home that will probably cost more than the revenue collected. This is a chance for the government to admit fault. This has been bad news from the start. You had a disappointed Treasurer after he did not get the position he wanted, so the first sitting week back after losing the deputy leadership to Mr Carroll he thought, ‘I’m not going to announce things in a proper way. I’m going to announce this at an industry breakfast and take everyone else by surprise.’ We saw the media briefing. Do not say it did not come as a surprise; colleagues were very unhappy about it. You could bookend that by saying it was poorly planned and implemented from the start. We would rather drop this bill than deal with the ridiculous, wacky suggestions from the Greens political party.

Ryan BATCHELOR (Southern Metropolitan) (15:11): I am pleased to rise and speak on the State Taxation Acts and Other Acts Amendment Bill 2023. This is obviously one of the regular sequence of tax bills that the government brings forward to the chamber, often to deal with a raft of minor amendments to the tax law to ensure that the drafting provisions on the books reflect the original intent of policies but also to ensure that where certain errors of drafting in the original legislation were uncovered, those areas can be rectified. But occasionally, as in this bill, there are a couple of material changes to Victoria’s tax law that these bills seek to introduce.

Before I get into the detail of those material changes to tax law, I just want to take a moment. It is important that we debate tax laws in this place, because taxation is an important part of ensuring that government services can operate. Bills that levy tax do so for a purpose. I think before we get into a big debate about the details of the particular measures, we need to look at the underlying purpose of taxation, and that is to raise the revenue necessary to do the things that Victorians expect governments to do, and that is to pay our teachers, pay our nurses, pay our police, build new hospitals, build new schools and build the necessary critical infrastructure that our community expects our state government to deliver. If you support those things, if you stand up in this place and support our teachers and our nurses and our police and our infrastructure and say that more needs to be done to improve those services, then you also need to support a robust and adequate taxation system to fund them, because otherwise the claims of support are hollow, just like the people who make them.

The first measure that we have got in this legislation, the bill before us today, that I will talk about materially is the changes to the vacant residential land tax. What that will do is encourage through the expansion of the vacant residential land tax more currently uninhabited properties to be made available, which should assist in alleviating some elements of the housing affordability crisis but also the renting crisis and also encourage the faster development of vacant land in established areas of the state. The other key change, which I will get to in a moment, deals with land tax apportionment and the windfall gains tax. The first of these two measures is, at its core, to try and increase the supply of housing that is available either on the rental market or for purchase by owner-occupiers or, in the case of undeveloped lots of land, to build new homes. The reform in this legislation seeks to expand the application of the vacant residential land tax, which currently is imposed on residential properties that are not lived in, that are unoccupied, in 16 of Melbourne’s inner and middle suburban councils, and it expands that across the entire state. The existing provisions for the vacant residential land tax for those who do have a property that is unoccupied will expand a levy on those properties to encourage alternative and better uses. Under the amended vacant residential land tax, the period that properties can be deemed vacant will start on 1 January 2024, with the tax change commencing in 2025.

The vacant residential land tax has been operating in Victoria for a number of years, limited to the original 16 of Melbourne’s inner and middle suburban local government areas, but this change will expand the application of the tax statewide, and the exemptions that go with the tax will also be expanded statewide. Things like holiday homes, properties that have been recently acquired or which are regularly occupied for work purposes and properties under construction either for new builds or for renovations will be exempt from paying the tax. So people who have got a holiday house do not need to worry about these changes; people who are building a new home which is under construction or who are renovating their home and have moved out and therefore there is no-one living at the property will not be affected by these changes. These changes are designed to stop people – property investors – buying a house, leaving it vacant, trying to ride the capital gains growth on that property and preventing someone else from using it as a place where they can live. It is all about motivating existing supply that is not in the residential property market either for renters or for prospective homebuyers into that market, or if there is land that is not being used – residential land that is undeveloped that could be developed. This tax will apply to those properties and hopefully lead to the transition of those from unproductive uses to ones that are actually putting a roof over people’s heads. That is exactly what the tax is designed to do.

The change will also close a loophole where the vacant residential land tax did not apply to unimproved land, which had previously enabled this valuable land to slip through the cracks of the regime in cases where that land would otherwise be suitable for residential development. So again it is encouraging that land that may be unimproved to be brought into the development market. We think that creating incentives to reduce the number of houses that are not lived in is a good way to ensure that more Victorians have a place to live. It will help ease the housing crisis and should help ease the rental crisis, and it is just another example of concrete action that the government is taking.

The second important and material change that this legislation before us today, the State Taxation Acts and Other Acts Amendment Bill 2023, will do is change the land tax apportionment and windfall gains tax apportionment and protect homebuyers from being landed with these taxes when they purchase properties. What the legislation will do is prohibit the apportionment of land tax and known windfall gains tax liabilities between a vendor and a purchaser under a contract of sale of land. This change has no impact on the revenue side because in the end these taxes were being paid; it has no effect on how much money goes into the State Revenue Office.

But what we have seen happening in practice is that those owners who were subject to either land apportionment tax or known windfall gains tax liabilities have been apportioning those land tax and windfall gains tax liabilities onto purchasers – so passing a tax liability that the vendor should have paid on to the purchaser. In many cases those purchasers may not have been otherwise subject to those taxes. So what we are doing through this legislation is protecting homebuyers from paying the land tax liabilities of vendors, and that is a good step for those homebuyers, it is a positive step for homebuyers, and it gives them safety and gives them security from being unfairly exploited by unscrupulous vendors who are trying to dodge their own tax liabilities by passing them on to someone else.

It reflects the really important principle that those people who are liable for taxes should pay them, and they should not try and bump them off to someone else – in this case under contracts of a sale of land. We think that this is particularly pernicious because there are certain circumstances, and there have been cases of this, where the apportionment of the land tax settlement is often not known by the purchaser at the time of entering the contract. So contracts are being signed in good faith, and then it is only at the time of settlement where the precise nature of the quantum of liability of land and windfall gains tax that is being passed on is made evident, which means that it makes the point of settlement very difficult for purchasers and can lead to quite surprising, unexpected and difficult circumstances for many of them.

The legislation before us today would prohibit these sorts of arrangements, improve the transparency in the land transaction, particularly around settlement, and reflect the government’s original intent: when we introduced the windfall gains tax, it was designed to be a tax, as it says, on the windfall gains of property developers. It is not fair that those property developers are seeking to off-load their tax liabilities onto purchasers who would not have had to pay it, because they are not subject to it but are being lumped with the tax bill. So we are making it beyond doubt that that behaviour is not acceptable. These amendments will apply to contracts of sale from 1 January 2024, so there is the necessary time for the systems and processes and for the contracts for the purchase and sale of land to be adequately dealt with.

The bill in its detail does a range of other things. It has a long list of other minor and technical changes to a range of state taxation legislation. I will not go through them in detail but there are amendments to the Duties Act 2000, the First Home Owner Grant and Home Buyer Schemes Act 2000, the Land Tax Act 2005, the Valuation of Land Act 1960, the Local Government Act 1989, the Windfall Gains Tax Act 2021 and the Treasury Corporation of Victoria Act 1992 to correct a range of things, ranging from major and material issues that I have talked about in detail to some very minor and otherwise technical amendments.

I think in consideration of this tax bill, as with all tax bills, the people occupying this chamber need to give some consideration to what they think should happen if these types of bills do not pass. If the state government is unable to raise the revenue it seeks to raise through its taxation regime, there are really two choices that people have in front of them. We can either raise the taxes that are necessary to fund the services of the government or we can cut those services. So for those speaking against this bill, for those voting against this bill, wherever they sit in this chamber, they should be honest about the choice they are actually making – that is, between funding our services and not funding our services; it is between supporting the things that Victorians rely on, the infrastructure that they need to get them to work, the schools and hospitals, or not.

If you do not want the state government to be passing tax bills through the Parliament, then you have got an obligation to the people to come into the Parliament and explain what stuff you want state governments not to do, because that is the choice that we have. There are not any free choices for members of Parliament in legislation that gets put before us. You have got to make a judgement, and the judgement before us here today is: do we support legislation to increase taxes on vacant land and to ensure the proper apportionment of land tax and windfall gains tax between people who are supposed to pay it? If you do not believe that, if you do not support this bill, then you should come clean and explain what services you want cut, because that is the natural consequence of not supporting state taxation – it is seeing our schools go underfunded, it is seeing our hospitals go underfunded and it is seeing our transport infrastructure not be built. Every time we get someone not from the government come in and ask us to fund this program, fund this service, do more of this sort of thing, people should reflect on whether they have come into this place and voted for the tax regimes that are needed to pay for them as well.

Bev McARTHUR (Western Victoria) (15:26): In rising to speak on the State Taxation Acts and Other Acts Amendment Bill 2023 I find it difficult to say anything original about this government and its attitude to tax. This bill contains the 51st and 52nd new taxes since the former Premier’s commitment to no new taxes, so I cannot be alone in lacking inspiration. In fact if we look at the tax itself, it seems that even the Treasurer has run out of new things to tax, so he has had to go back yet again to property, to landowners and especially to those individuals who prepare for their own future and their own retirement so they are not a burden on society – ‘No, we’ll tax them.’ In fairness, it must be hard for the Treasurer to find anything new to tax, especially since the High Court decided his effort on electric vehicles was illegal. On that note, his party must also be hoping he consulted with the lawyers about these taxes more than he did his political colleagues, or he could be back in court. The Assistant Treasurer did not seem to know what was going on just hours after the Treasurer’s business breakfast bombshell, and the Premier’s hasty efforts to appear in charge were pretty unconvincing.

I have a tip for the Treasurer. If you cannot think of anything more to tax or anything new to tax, if you cannot be bothered to consult with your own colleagues about new taxes, if you cannot even make sure your taxes are constitutional and legal, there is a simple solution: stop spending. Mr Batchelor suggests that would mean a cut to nurses and police and services. No, it would not. The spending of this government is totally out of control because it cannot spend our money wisely. $1.3 billion to cancel a road contract, at least half a billion to cancel the Commonwealth Games, let alone the billions in overspending on every single project you embark on – you are incapable of managing any project and doing a job properly. So there are billions to be saved in this government, but you do not know how to manage one project. Over the past nine years this Labor government has introduced or raised a tax every two months, on average. Now they seem to be coming out weekly, and they have had to because spending is out of control. The forward estimates in the last budget showed Victoria’s debt will hit $171 billion by 2027 and that debt interest payments will rise to $22 million per day. These interest payments achieve nothing for the state. They do not fix a road. They do not pay a teacher. They do not fund a hospital. They do not pay a nurse. They are just debt interest payments. The budget, even without the spiralling cost of living, shows us that things are going to get a lot worse. Taxes taken from the Victorian economy will rise in the years to 2027. If you think you are struggling now, I am sorry to say the future looks a whole lot worse.

And we know why this has happened: budget blowouts, major project spending out of control, an ever-increasing public service in number and wages and a lower percentage of productive industry shouldering an ever higher burden of tax. At the last budget the Treasurer boasted of increased revenue, as if that was a good thing, but the rise from an $83 billion tax take this year to $89 billion next year is $6 billion stripped from businesses, ratepayers and taxpayers. The last budget revealed government revenue will hit $99.9 billion by 2026–27, and the bill we are discussing today will take us up towards, if not beyond, the threshold of a $100 billion state. It is an impressive figure but a disaster for those of us who understand what big government really means and who recognise the horrifically destructive effect this will have on our state’s productivity and ultimately our prosperity.

So the bigger picture, the background to this bill, is pretty awful. The detail, I am sorry to say, is no better. I alluded earlier to the fact that the Treasurer had apparently scrawled this policy, the statewide expansion of the vacant residential property tax and inclusion of development land, on his menu at the Property Council of Australia breakfast last month. I am sure his ticket was complimentary, but it was a pretty expensive breakfast for Victoria. Clearly there was no consultation with the industry or individuals who actually understand the subject of this bill, who know how the property market works and who any normal government would put top of the list of people to speak to, even if they do not follow their advice directly.

I have got a few quotes here. I think they are worth considering for not just the content but the tone. I have heard a lot of industry groups criticising governments in the past, but the sheer shock, outrage and anger really came through in these comments and show how unprecedented this announcement was. Real Estate Institute of Victoria CEO Quentin Kilian described it as:

… just another regrettable demonstration of poor property policy development, and shortsightedness from the Victorian Government.

And he pointed out the effect disincentivising property investors will have on an already overheated rental market:

The exodus of rental providers has increased over the past year and with yet again another round of taxation aimed at the property market, there is no doubt that investors will continue to leave Victoria, exacerbating the rental shortage.

In combination with the already heavy toll exacted by this year’s budget, there is no way this can do anything other than breed uncertainty and ultimately disinvestment. Mr Kilian concluded:

We can assure Mr Pallas, and his team of policy makers, that the only behaviour this idea will initiate is for more landowners to sell-up and continue to turn away from Victoria for investment.

It will create more uncertainly in investment at a time when the participants in the sector are crying out for consistency and commonsense and concepts that inject more confidence into real estate regulation.

The property sector’s shock was all the more palpable given the affordability partnership the government had signed with key housing players just weeks earlier. I am always cynical about the worth of these partnership agreements, but they did not just ignore this one, they flat-out contradicted it. The Property Council of Australia CEO Mike Zorbas described the tax expansion as a trust-burner and said:

Here’s a tip for state governments trying to reach ambitious housing goals in partnership.

Don’t “do a Victoria”.

Don’t go slow on housing and approvals for the past few years and then seek redemption through a partnership with industry that you set on fire inside a fortnight.

…

Burning through the trust. Always a bad way to start a partnership.

The Victorian director of the property council took the same view. Cath Evans described her disappointment that the agreement which her organisation fully intended to honour had been abandoned:

The Partnership clearly outlines that consultation is a shared responsibility and that we all agree to work together to find solutions in a complex economic environment.

Sadly, 8 business days later, the Treasurer, who was a signatory to the Partnership, has announced the introduction of new and expanded taxes without any consultation … and we are yet to understand how these reforms will improve the availability of rental stock to the market or increase the supply of new homes.

These widespread views should certainly cause pause for thought on the attitude the Allan Labor government takes to incredibly important sectors in our state economy. But, to be honest, even the best consultation process in the world could not disguise the fact the measures contained in this bill are unfair, damaging and counterproductive. Extension of the existing vacant residential land tax to include all regional Victoria and additionally to cover all Victorian residential land undeveloped for five years and more could never be a popular policy, especially after the recent windfall tax hit and the budget’s land tax grabs.

Landlords have been repeatedly hammered in this state. At the same time rents have risen. Are we really surprised? I have stressed before in this place that many landlords do not actually own the properties they lease out. They are still paying off mortgages that have been affected by interest rate increases not borne by their tenants. Moreover, they foot the bill for soaring maintenance costs, real estate charges, insurance for landlords and VCAT charges if disputes arise, as well as the recent hikes in land tax and rates, to say nothing of your 135 regulations on landlords. When they buy they shoulder stamp duty and will eventually deal with capital gains tax upon selling. It is worth noting that many landlords refrained from hiking rents during lockdowns, with some even pausing payments to support tenants facing financial hardship. Landlords shoulder these expenses and risks, yet they are navigating a growing maze of government regulations that could intensify at any moment.

Despite this, one side of politics repeatedly demonises landlords as land-banking, profit-hungry vultures. Our last Premier was particularly keen on this line. On introducing one massive set of new levies he dismissed the financial challenge landlords face, suggesting they simply claim it on tax. That is one reason rents keep rising. Just months later in this bill our new Premier seems set on the same approach with the expansion of this vacant residential land tax. The exit of rental providers has increased over the past year – unsurprising given the round after round of taxation aimed at the property market. Last month rent prices in Melbourne rose to the highest recorded level ever, the average increase $95 a week to $520 a week, nearly a 25 per cent increase in one single year. There is no doubt that investors will continue to leave Victoria, exacerbating the rental shortage.

Landlords really are not the culprits here, however much one side of politics wants to demonise them. The problem is whatever political point you wish to score it will not actually solve the problem. The housing market is driven by economics, not political slogans, and increased taxes and regulations have one inevitable result: reduced supply and therefore higher prices. That is why I oppose this bill. The principle of the new taxes is wrong; the detail is wrong; the economic situation is wrong. No tax is a good tax, but this bill shows just how jaded this government is. It is intellectually as well as monetarily bankrupt.

Michael GALEA (South-Eastern Metropolitan) (15:39): I also rise today to speak on the State Taxation Acts and Other Acts Amendment Bill 2023, and I feel to start with I would like to pick up on a couple of points from the previous contribution. First, I am going to be generous and I am going to actually pick out the one thing from Mrs McArthur’s speech that I agree with, which is her comment that the housing crisis is driven by economics. Supply is the answer, and that is exactly why this government has released a housing statement that goes to the heart of the issue and across many different parts of this issue. We have multiple ministers with a focus on this as part of our housing agenda – as part of this housing statement. We heard in question time today from Minister Shing about the huge amount of work being done with regard to that regeneration of social housing that is ongoing, whether it is through the much-needed replacement of the 44 towers or through other smaller projects as well, in a way that means we are not only actually making these places inhabitable – genuinely not to overexaggerate that but making them inhabitable – as they are currently uninhabitable –

Bev McArthur: Habitable.

Michael GALEA: Habitable, yes, you are quite right to correct me there – habitable. We are making them habitable, but we are also expanding the supply quite dramatically –

Bev McArthur: I’m trying to help you out.

Michael GALEA: I always appreciate support from you, Mrs McArthur. We are dramatically increasing the supply as well with these social housing projects. What we are also doing is addressing this through some very systemic reforms – which I am sure I will have the opportunity to talk to in a later motion at some point today – in relation to the planning across metropolitan Melbourne and indeed across regional Victoria as well that are going to have a dramatic impact on the supply that we need to provide and that this government is determined to provide in order to ameliorate this housing and rental crisis and to provide the housing and the housing options that Victorians need. It is a very exciting package of works from many, many different facets, and one point on which I do agree with you, Mrs McArthur, is that this is a housing crisis driven by supply and by economics.

Bev McArthur: You’ll reduce supply if you keep taxing everybody.

Michael GALEA: Which is exactly what we are not doing, Mrs McArthur.

Ryan Batchelor interjected.

Michael GALEA: This is exactly what my next point is, to pick up on Mr Batchelor’s comments, who quite rightly says we hear sound and fury and fire from the other side every time we talk about tax. It sounds like if they had their way we would have no taxes at all. We also hear sounds of fire and fury about regional roads, as a good example, and that is something that we are already investing in and increasing our investment in the maintenance of. Where will the funding for this come from if we do not have a robust taxation structure? Where will it come from?

That is what those opposite do not answer. They do not seem to want to answer, and it just seems to reinforce again that they are not interested in answers because they are not interested in governing. They are not interested in trying to get into government. They seem to be quite happy in opposition, and if they keep going on this route, that is probably where they are going to end up staying. If you want to actually do things for this state, as Mr Batchelor says, you have to actually look at all sides of the equation. You have to make it work. You cannot just say on the one hand ‘Remove all the taxes and fund all these things’ and on the other hand ‘We’re only going to support bills if you do everything that we want.’ I have said this a few times in recent weeks, but the very nature of this place is that we work together, we engage and we argue quite a lot, and we do so in a way that is conducive to making better legislation.

Bev McArthur: But you don’t listen.

Michael GALEA: I will take you up on that, Mrs McArthur. We absolutely do listen, and there are a number of examples from recent weeks alone in this place where we have done exactly that, and we have come to outcomes which have been amenable to different parties across the aisle. You and I have even agreed on some things too – can you believe that – Mrs McArthur. This is a reasonable step forward on the housing issue, which is one of the most profound issues facing our state at this point.

I note that with my colleague Mr Batchelor on this side, as well as my colleague on the other side of the aisle Mr McCracken, the three of us are all participants in the Legal and Social Issues Committee, one of the standing committees of this place. As part of that we have recently been and in fact are still conducting an inquiry into this very issue. We have heard some very illuminating evidence as well from many different quarters. One of the clear things that is coming through is that we really do need to change the supply. We need to do a lot of things with social housing, and it is great to see that we are already doing them. In fact the first hearing that we had after this housing statement was announced I would say overwhelmingly showed people, whether stakeholders or other experts from a different array of backgrounds in this space, in a wide array of support for this housing statement.

This is a wide policy that is going to make a huge impact in many different ways, and the bill that we have before us today has in fact two particular changes that we will be pursuing as part of these reforms. The first one is changes to the vacant residential land tax. Not to go over old ground here, but my colleague Mr Batchelor referenced that the current tax targets 16 mostly inner-city councils within metropolitan Melbourne – the inner belt of 16 councils where this tax currently applies. But I am sure all members in this chamber would agree that issues pertaining to housing affordability, to the ability to rent a house at all, to the ability to affordably rent a house, are not constrained to 16 councils in the centre of Melbourne. They are statewide. They are in my region in the south-east. They are in regional Victoria as well and right across this state. That is why this is a sensible reform which expands the vacant residential land tax not just to a select portion of inner and middle Melbourne but to those broader outer suburban and regional areas, constituencies like mine, which are particularly suffering through this. The second thing is –

Bev McArthur interjected.

Michael GALEA: Mrs McArthur, you like to say that we say that people need to be taxed. The second whole point of this is actually protecting customers, protecting consumers from being unfairly taxed. If you have listened to our contributions, you will actually know that the windfall gains tax can currently be passed on unfairly without much notice, in fact without much awareness, to unsuspecting buyers, whether it is a first home buyer, a young couple getting into the housing market – and we have got many of them in growing areas like Clyde North and Berwick, areas that I represent, or Cranbourne ‍– or whether it is an established buyer. Maybe it is your third home that you have moved into that you have bought. Whatever stage of your journey you are in, for people buying homes there are some, let us say, relatively unscrupulous people who try to pass those taxes, very unfairly, on to working families, and that is exactly what the second part of this bill seeks to address by preventing that from happening by saying, ‘No. If you’re subject to the windfall gains tax, you will be the one to pay the windfall gains tax. You will not pass that on, whether it is to a first home buyer, to another family situation moving into their new home, to a consumer, to a homebuyer.’ This is actually a bill, contrary to the loud objections that we hear from across the other side, that is actually going to protect consumers from that tax. This is actually something that is in the interests of many of my constituents and in the interests of people who are purchasing a home, because they will not be subject to those charges.

These reforms are not the entire picture by any means, but they are two reforms that go some significant way towards achieving the rental reforms that we have laid out, achieving the housing reforms that we have laid out in this housing statement.

Bev McArthur interjected.

Michael GALEA: You can say that, but the population is actually growing quite significantly. In fact people are moving, I think, to Victoria more than almost any other state. I know the Liberals love to talk down Victoria; they love to constantly talk down Victoria. We have heard in the last few days, as members to my front and left are reminding me, that the CommSec report just a couple of days ago said we are the number one performing economy in Australia. With all due respect to our friends in South Australia, who someone mentioned before, it is not South Australia. It is not Western Australia, and it is not Tasmania. It is not New South Wales, and it is definitely not Queensland. It is of course Victoria. Victoria is the number one. And I believe as well – and I only caught it in passing this morning – that we are the most livable state as well. We might be tied at the top with South Australia with that one – good on them. Their tram network is not quite as large as ours, which I am sure comes as a great discomfort to you, Mrs McArthur; I know you do love Melbourne’s bustling trams. But we are indeed apparently the equal most livable state as well. So not only are we the number one, best performing economy, we are also one of the most livable places to be.

Contrary to what those opposite always love to say – they are always running down this state – the fact is people are voting with their feet. People are desperate to come to Victoria. We are seeing the challenges of that, and we are responding to that with the housing statement. The housing statement is a huge step towards addressing the issue. The issue is not that people are wanting to leave Victoria – quite the opposite. If people were wanting to leave Victoria, we would not have a housing issue. People want to come here. That is why we are putting this statement in place. We are putting these reforms in place with this bill that is before the house today because we know that people want to come to this state. Why wouldn’t you? We are the leading biotechnology state in the country and one of the top three for medical research in the world. The top three cities are Melbourne, Boston and London. There are so many wonderful parts, obviously: our sport, our culture and, again, our economy, whichever part of business you are in. We are the number one performing state in the country from that CommSec report. Why wouldn’t you want to be in Victoria? If we did have the situation that those opposite love to paint – and I am sure their friends on Sky News are saying ‘Yes, people will see busloads driving out of Victoria; they can’t wait to leave’ – we would not have a rental shortage. We would have the opposite problem.

Harriet Shing interjected.

Michael GALEA: 2.7 per cent unemployment, the Minister for Housing reminds me. I might be mistaken, but is that not one of the –

Members interjecting.

Michael GALEA: 2.4 per cent? I stand corrected: a 2.4 per cent regional unemployment rate, which is remarkably low. It might even be one of the lowest on record.

Harriet Shing interjected.

Michael GALEA: It is the lowest on record. It is certainly lower than anything that those opposite, who claim to speak for regional Victoria, have ever been able to deliver, whether this century in the four years that they were entrusted to govern or in many more years in the last century in which they were. Look at what happened then to regional Victoria. We do not need to bring back the K-word and say what happened to all our regional rail lines.

Members interjecting.

Michael GALEA: Yes, why bother investing when you can close them down? But we have actually expanded them. People actually want to move to regional Victoria as well. As I say, this is a bill that recognises that, because expanding the tax beyond those 16 councils to be statewide is recognition of the fact that there is a housing issue in regional Victoria. Why wouldn’t there be, because regional Victoria is a great place to live. It might not be quite as good as the South-Eastern Metropolitan Region, but it is a fantastic place to be. You have got V/Line fares capped at the metro rate, you have got the Regional Rail Revival and you have got huge investment across all corners of our state, not just in Melbourne. This is not a government that refers to regional Victoria as the toenails of the state. This is a government that puts regional Victoria at the heart of its policy. That is why this bill recognises that, in part with the expansion of that vacant residential land tax, because people in regional Victoria should not be restricted from moving to a home. If they can see a home up their street that has deliberately been left vacant and they need a house, I think that they should have a right to be able to live in the town that they wish to live in, in their home town or wherever that may be.

I refer back to my opening comments to conclude –

Members interjecting.

The ACTING PRESIDENT (John Berger): Order! There is too much noise in the chamber.

Michael GALEA: It is very much quality noise, and I appreciate the interjection. Those opposite do not seem to grasp that in order to fund these things, in order to continue to fund this record investment in regional Victoria – and to fund these regional roads, Mrs McArthur – you do actually need to have a sound tax structure. This is one small part of that. I know that you do not like to hear that, I know that you will not accept that, but on this side of the house we recognise that there is a balance that we need to strike in order to get the best outcomes for all Victorians, whether they live in regional Victoria, in the inner city or in my wonderful electorate of the South-Eastern Metropolitan Region. I commend this bill to the house.

Gaelle BROAD (Northern Victoria) (15:54): I rise to speak on the State Taxation Acts and Other Acts Amendment Bill 2023. There are a number of proposed changes to the act, but this bill certainly does hit landowners with yet another tax. The Labor government’s decision to expand the vacant residential land tax to regional Victoria will impact many local families and retirees, and the Nationals and Liberals oppose the bill. The vacancy tax currently applies to houses in Melbourne’s inner- and middle-ring suburbs that have been unoccupied for more than six months, but it will be expanded to include unoccupied residential properties across the whole state from 1 January 2025. Owners will be taxed an extra 1 per cent of the capital improved value of the land, or $5000 for every $500,000, unless they can prove they lived at the property for at least four weeks of the year or rented it for at least half the year. This government likes to talk about the Kennett era, but they have been in for nine years, and what we have seen is just waste, waste, waste and tax after tax – so many taxes that even the new Premier was caught off guard by this one. We now have the biggest state debt in Australia, and now Victorians are being punished for Labor’s financial mismanagement.

The Allan Labor government claims the decision to extend the tax was made in an effort to address the growing housing crisis. They made the same claim when they first introduced this tax to 16 inner-city suburbs back in 2017, arguing that this tax would boost housing supply and make housing and renting more affordable, but with the median Melbourne unit rental price rising by 22.4 per cent over the past year it would be tough to argue that housing and renting in Melbourne’s inner suburbs has become more affordable. Now they are trying to use the same argument for regional Victoria, where the cost of renting a house has already increased by over 11 per cent in the past year.

Under this government we have seen tax after tax introduced. We have had so many taxes. This would be number 52, but to name just a few others, we have got the numberplate tax that has been introduced; the increased fire service property levy; a 50 per cent increase to births, deaths and marriages fees; an increase to the WorkCover average premium rates; an increase to the payroll tax on business; and also the schools tax – the payroll tax on independent schools. We have stamp duty and land tax and now the new taxes, such as the holiday and tourism tax, the rent tax and now this, the vacant residential land tax, which will only serve to make Victoria less attractive to investors to buy and maintain properties on the rental market.

Victorians already pay the highest taxes – over $5000 per person – of any state in Australia, including the highest property taxes per capita in the nation. Less rental properties will only cause greater competition in the rental market and result in a greater reliance on social housing. The government should be looking at ways to incentivise additional rental stock, rather than driving people out of the market. Instead of increasing supply and reducing costs, Labor has increased taxes on homes and driven up the cost of residential construction through their Big Build waste and mismanagement. Rents are at record highs and growing, with the median house rent growing over 11 per cent and the median unit rent growing 22 per cent year on year. Instead of Victoria being a great place to live, under this government it has become a great place to escape. More and more people and businesses are moving interstate.

The new vacant property tax will apply to holiday homes, and owners will need to prove their use of a property or be slapped with the new vacant property tax. The government has confirmed it will soon start looking into water and sewerage usage of holiday homes to assess how often home owners visit a property. In addition, the government will encourage neighbours to dob on each other, and the State Revenue Office may then require home owners to prove they have used the property, including handing over receipts for nearby shopping purchases. This new vacant land tax is estimated to bring in just $37 million in extra funds, and it is hard to believe the extent that this government is going to and the nightmare of administering this new tax when we are currently paying $15 million a day in interest payments on our state debt – each and every day – yet this government continues to bind the state up with more and more rules and requirements, making life harder and harder.

If I can just talk to one of the main provisions of this bill with the vacant land tax, the period that properties can be deemed vacant will start on 1 January 2024, with the change commencing in 2025. Then, when we talk about how difficult it is to administer, existing exemptions will continue to apply statewide, including to holiday homes, properties recently acquired or regularly occupied for work purposes and properties being built or renovated. The government has provided written advice stating that the holiday home exemption is not available for land owned by companies, associations, organisations or self-managed super funds, but following the Treasurer Tim Pallas’s announcement that the government would extend the vacancy tax to regional areas, the Victorian Farmers Federation expressed serious concern about the possible adverse effects this would have on houses intended for farm workers. While farm properties would not be affected, there are still concerns that there may be circumstances where houses used for farm workers are not located on farmland and therefore may be subject to this new tax.

Our tax system in this state needs review. Are our tax policy settings competitive? What is the impact of these new taxes on employment growth, on wage growth, investment and economic growth? What is the impact of all these taxes on families, on renters and on small businesses? Under this government the cost of living just keeps going up and all we see is more chaos and confusion. Policy decisions have been made on the run without doing the homework or considering the impact on people.

With this bill there has been no consultation with industry, but we have heard the feedback from them. The Real Estate Institute of Victoria CEO Quentin Kilian said he was disgusted by the fact that they had not been engaged:

They might have changed leaders, but the approach is the same – they start with the premise of punishing taxpayers …

The Property Council of Australia chief executive Mike Zorbas said the:

… hidden tax grabs are a major trust-burner.

I know, Ryan Batchelor, you mentioned earlier: well, what will it take? Should we cut services? Well, what about cutting waste? The Commonwealth Games is $600 million completely wasted, for delivering nothing, and this is just a tax that is going to raise $37 million – so $37 million compared to $600 million wasted. The government states this tax will go towards housing and the housing statement – 800,000 homes in 10 years. But my concern is the housing statement is just a statement. We heard about the Commonwealth Games how excellent and amazing and good it was going to be ‍– great headlines, nothing delivered.

I have spoken with people in the building industry and I have spoken to architects as well, and there are big question marks over the ability to build that amount of houses in that amount of time, because at this point we do not have the supplies and we do not have the builders. There is a significant shortage, and this government again do not seem to do their homework before making these big announcements. Now my concern with all these new taxes that are being introduced is we do not just have a shortage of teachers in this state, we have a shortage of accountants just to get through all this. When you raise the question on the other side of the house: do we really want to be in government? Well, I can tell you it is 1100 days to the next state election in 2026, and I am counting the sleeps. I can assure you that what we are seeing here are just more taxes when Victorians are experiencing skyrocketing living costs. I want to thank Evan Mulholland, who spoke to the reasoned amendment – one that I hope members of this house will support.

Lee TARLAMIS (South-Eastern Metropolitan) (16:03): I move:

That debate on this bill be adjourned until the next day of meeting.

Motion agreed to and debate adjourned until next day of meeting.