Tuesday, 14 May 2024

Commercial and Industrial Property Tax Reform Bill 2024

Second reading

Debate resumed on motion of Harriet Shing:

That this bill be now read a second time.

Evan MULHOLLAND (Northern Metropolitan) (16:43): I rise to speak on the Commercial and Industrial Property Tax Reform Bill 2024, and I would like to begin by thanking my colleague the Shadow Treasurer Brad Rowswell, the member for Sandringham in the other place, for the work he has done engaging with stakeholders – stakeholders like the Victorian Chamber of Commerce and Industry, the Real Estate Institute of Victoria, the Property Council of Australia and the Property Investment Professionals of Australia. I would also like to thank my colleagues for their constructive engagement with him.

On this side of the chamber we support lower, simpler and fairer taxes and do not want to see taxes impose a burden on the people of Victoria. We want to see taxes that are simpler, fairer and more efficient. It has long been recognised and long been talked about in places such as this that stamp duty is a very inefficient form of taxation. This has also been recognised by a large number of economists, including in the Henry tax review. Stamp duty is a tax on transactions, and as a result it penalises those who need to buy or sell property or those that would like to. At the same time those that sit on a single property for a long time pay virtually no tax, leaving the previous group to pick up the tab. There is no reason why this is desirable. In fact it is quite undesirable. When a business is penalised from upsizing its facilities and growing, it is not just that business that misses out. It is those potential jobs, prosperity and even additional tax revenue that we might be missing out on. In a nutshell that is what this reform should do. It should improve capital allocation. Stamp duty is a burden on those looking to take a leap into commercial and industrial property or to change their facilities to match the needs of their businesses.

The government claims this reform will result in a $50 billion economic uplift. While it is not clear how the government got to that $50 billion figure and arrived at it, we agree that it is likely to see an economic uplift, because lately we have seen businesses leaving Victoria for greener pastures. South Australia has gone as far as abolishing stamp duty on commercial and industrial property and not replacing it with anything else. They have abolished it entirely in just three years. There is no double taxation and no confusion. Nonetheless, we do not oppose the government’s reform in principle, but unlike the South Australians’ outright abolition the government’s proposal is a complex one. We see this a bit. We see South Australia rolling out the red carpet for business while we roll out the red tape. We have got the South Australian Labor Premier bidding for our major events while we cut tourism budgets. We have got the South Australian Premier bidding for business and for manufacturing because of his government’s gas policies, bragging about his government’s pro-gas environment in which his state is operating in comparison to Victoria’s. So you have got other states like South Australia rolling out the red carpet for business while we are rolling out more red tape.

As I said, the government’s proposal is a complex one. It is not a simple removal of stamp duty; there is a catch. It is a removal of stamp duty, a 10-year transition program and then the implementation of a new tax, the commercial and industrial property tax, which I will call CIPT from now on, from the 10th year for transactions after 1 July this year. Any subsequent transactions of these properties would not incur stamp duty but would incur CIPT. Any properties that are not transacted would not be subject to the CIPT. This is the model the government has chosen to use. There are many other approaches, such as the complete abolition, like in South Australia, or they could have opted to take the approach of their Labor comrades in the ACT, where they have ended up with both taxes somehow.

As I said, South Australia has gone to complete abolition. The government, and I am speaking with stakeholders, has actually been forced into this reform because the reality of the situation with South Australia means that any business in Victoria looking to expand, looking to grow or maybe looking to downsize would have opted to go to South Australia, where they have abolished stamp duty and replaced it with nothing. South Australia has put us at a distinct economic disadvantage. By not actually putting forward reform that is pro business, we are rolling out the red tape; South Australia is rolling out the red carpet for business. We keep punishing our commercial, industrial and manufacturing users in Victoria with new taxes like the bin charge last week, like new red tape, like WorkCover premium increases and like energy cost increases through our shortage of gas. So I think they have been dragged here kicking and screaming by the business sector; they have finally listened to the business community and put this forward.

As I said, it is a bit of a complex model. The government proposes that the tax rate be set at 1 per cent of the unimproved value of the property. We believe on this side that that should be lower, because we believe in lower, simpler and better taxes. The government’s rate of 1 per cent of unimproved land value is unnecessarily high, and I will give an example. Hypothetically, if we had no stamp duty and only a commercial and industrial property tax of 1 per cent, the government would be raising far more revenue than it does from stamp duty. Additionally, there is currently a commercial and industrial stamp duty concession for regional areas. My regional colleagues in the chamber are very, very big supporters of that, and I hope regional colleagues on the other side of the chamber will be big supporters of this concession of industrial and commercial stamp duty for regional areas. But it is actually not considered as part of these reforms, which actually represent an abolition of this concession by stealth and represent a tax increase for those people living in regional Victoria.

Once again we see this city-centric government abandoning people from regional Victoria, abandoning entrepreneurs from regional Victoria, abandoning small business owners from regional Victoria and abandoning manufacturers from regional Victoria, because this is a city-centric government. This represents a tax hit, a tax increase on those in regional Victoria trying to have a go at employing people, trying to have a go at providing goods to people and trying to have a go at putting food on the plate for all Victorians, and yet they are punished with a tax increase from a city-centric government that lives within the tram tracks and is only focused on those within the tram tracks. I think it is an important concession, and I think it is incumbent on the members opposite in their forthcoming contributions to update their speaking notes to explain why those in regional communities should be faced with a tax increase, explain the Treasurer’s actions in bringing this forward with a tax increase and, even better, explain why the current concession on stamp duty to those in regional areas on commercial and industrial property should be abolished. I am looking forward to hearing those contributions.

To this end we propose a rate of 0.8 per cent in metro areas and a rate of 0.4 per cent in regional areas. To explain the effect of our proposals, which we will move in amendments, I would like to give an example. Suppose Belinda owns a property in regional Victoria with an unimproved land value of $1 million and an improved land value of $2 million. If Belinda bought that property in regional Victoria today, she would pay $55,000 in stamp duty, including the 50 per cent regional concession. But under Labor’s proposal, if she bought this property after the final stamp duty had been paid and held onto that property for 13 years, she would have paid the equivalent of around $114,000. This equates to a $59,000 difference in what she would have to pay. Under our proposal Belinda would pay an amount that is about equivalent with the amount of stamp duty she currently pays, rather than paying $59,000 more under Labor because of the tax increase that they are pushing through. We understand that under the conditions Labor have created with their reckless spending and waste – I think it is over $40 billion now they have ticked over in the budget of blowouts on major infrastructure projects – the government is probably not in a good enough condition to go down the path of South Australia, where they are just abolishing stamp duty completely on commercial and industrial property. We believe our proposal, as put forward in our amendments, strikes a balance between the need to pay off Labor’s debt while improving efficiency, reducing the impost on business and creating a fair deal for regional Victoria.

As part of my own consultation for the bill, I spoke to many of the mighty manufacturers of the northern suburbs, and while they do not oppose this change, they are indeed suffering under the effect of Labor’s red tape and taxes. I mentioned earlier I recently brought Leader of the Opposition John Pesutto and Shadow Treasurer Brad Rowswell out to Sparkling Beverages in Campbellfield in my electorate – a great manufacturer in my electorate which employs 15 people in the north, and it certainly punches above its weight. It provides bottling from there. They do all the bottling to the supermarket and do all of the Woolworths home brand beverages. Your sodas, your tonics, your colas and your lemonades all come from the mighty northern suburbs in Campbellfield.

I would like to thank Sparkling Beverages owner Scott Edgley for allowing us to tour the factory. He told us and he certainly told the media that increases in WorkCover premiums were a particular issue, as were energy costs, the government’s attitude to gas and the extra costs involved in the container deposit scheme, but in particular so was the nasty in the budget last week where the government increased its bin tax from $129 per tonne to $169 per tonne, which is yet another increased tax being slogged on small manufacturers that will have a direct impact on the check-out for families. Families will pay more because Labor wastes and Labor taxes and somebody has to pay for that. The people that are paying for it are Victorians, and it is Victorians that are paying the price for Labor’s waste and mismanagement. Businesses are certainly feeling the pinch from Labor’s waste and Labor’s mismanagement. I would like to ask if my amendments could be circulated.

Amendments circulated pursuant to standing orders.

Evan MULHOLLAND: As part of our amendments, we will propose some additional changes to the government’s bill. One of the features of the government’s proposal is the option of, instead of paying stamp duty up-front, taking a government loan out to pay off stamp duty over a 10-year period. This loan attracts an interest rate which is comprised of one interest rate linked to the Treasury Corporation of Victoria’s 10-year bond rate – we have got no concerns with this – and a risk component. While we think it is prudent for a risk component to be charged, we are and I think all colleagues should be concerned by the lack of transparency around it and the potentially devious manner in which the Treasurer of the day could act without any transparency in regard to that rate. The component is determined by the Treasurer alone, and there is no mechanism in the bill which actually requires the Treasurer to explain the rationale for the change in the risk component. We could see the Treasurer of the day change that risk component, which could have dire consequences for commercial and industrial property users who have in good faith taken out this government loan rate, so this is a transparency measure. It is pretty non-controversial but would require the Treasurer to make an annual statement on how this risk component has been determined, to improve accountability. As I said, we propose these amendments in good faith and hope that the government can give them serious consideration.

We also think it is an opportunity for the crossbench to support lower and fairer taxes, particularly to recognise regional Victoria and make sure they are not hit with an increase in tax and to ensure transparency. As I was saying, regional Victorians will face an increase in tax under this change, and they will face an increase in tax because of the abolition of the concession. Under the law as it currently is, they have a concession available to them for commercial and industrial property, so if they choose to invest in regional Victoria, there is an incentive there to invest in regional Victoria. The government is saying now, clearly, by their actions that they do not want people to invest in regional Victoria. I think it is incumbent on members opposite to update their talking points and defend this change, which would see a concession taken up by people investing in regional Victoria abolished. They need to explain why as part of their reform they would not change their concession to make sure regional Victoria is still incentivised as a place to do business, because we want that investment to keep going.

Tom McIntosh interjected.

Evan MULHOLLAND: Mr McIntosh says it is a concession on something that does not exist anymore. Well, they will still have to pay the annual rate, and people should be incentivised, as they currently are, to invest in regional Victoria. We see the regional Victoria unemployment rate up from metro. We want to see people moving to regional Victoria, employing people in regional Victoria, so we can set up new businesses, we can have entrepreneurs invest in new businesses and we can see retail shops spring up in regional Victoria providing those job opportunities for locals. I think that is really important, and I think all members of Parliament here should think it is really important. Those that represent regional communities but might not live in them should think it is really important. Those who actually represent regional Victorians and do live there, like my colleague Mrs Broad, should think that it is a pretty good idea to offer that concession to regional Victorians as it currently exists.

I have done my own consultation on this bill. But my colleague the Shadow Treasurer Brad Rowswell also has, and one of the issues stakeholders raised with us is the risk of issues arising with the relatively short implementation period. We are less than two months away from the implementation of this bill. That is a very small amount of time for a large number of stakeholders to become familiar with this change, so we do encourage the government to work closely with relevant stakeholders to ensure that the process of transitioning is as smooth as possible.

In conclusion, we do not oppose this change broadly. We agree with the government that it will improve the efficiency of our tax system. We think it is an opportunity to ensure the new rate is fairer and lower and increase transparency on the transition loan, and I think that is really important as well. We do not want to see the Treasurer of the day change the rate without at least explaining himself, explaining the advice; we do not want to see it as a backdoor way of increasing taxes, which we know that he has done a good 55 times before; and we do not want to see the Treasurer of the day have that kind of power, at least without that transparency mechanism. I know in many other cases we have included transparency mechanisms as part of an amendment in this chamber and seen broad support from crossbench colleagues for that, so I hope this is the same.

I hope we see perhaps some more from this government, or we might have to wait until 2026. But in terms of the stamp duty reform piece, I think it is a pretty broad consensus that stamp duty is an inefficient tax. I really enjoyed my time on the inquiry set up by my colleague Mr Limbrick looking at stamp duty reform. It is an impediment for people downsizing, it is an impediment for people upsizing and it is definitely an impediment for first home buyers getting into the market, getting a slice of the great Australian dream, which has been turned into the great Labor nightmare by this government with their increases in property taxes. There are 55 new or increased taxes, and about half of them since 2014 have been on property. The thing about that is that when about half of all new or increased taxes are on property, someone has got to pay for that, and the people who pay are always or very often the most vulnerable Victorians, who are paying the price for Labor’s waste and incompetence over 10 years of Labor. They are paying the price through having to line up 50 metres long to get into a rental, having to cop increases in rents and also seeing increases in house prices, because those taxes do get passed on. There is not some invisible vacuum that Labor can reach and grab money from. It does get passed on. That is the way the economy works, and we see it too often: Labor wastes, and it is Victorians that pay the price for that, often vulnerable Victorians trying to get into the housing market. As I said, we do not oppose this reform, but we will ask the chamber to consider our very sensible amendments.

Katherine COPSEY (Southern Metropolitan) (17:05): I rise to speak also on the Commercial and Industrial Property Tax Reform Bill 2024. My colleague Mr Hibbins in the other place has spoken to this bill previously, so I will keep my comments today brief. The Greens have long pushed for a broad-based land tax reform, so we will be supporting this bill today. This bill phases out the current system of a one-off stamp duty payment on commercial and industrial property in Victoria and over a transition period replaces it with a new annual commercial and industrial property tax. I was also a member of the committee that examined stamp duty as part of our Economy and Infrastructure Committee inquiry and I concur that there is a broad consensus around the inefficiency of stamp duty and some of the unintended consequences that come from it, including the discouraging of rightsizing of property and the discouraging of moving to a property that suits the current needs of businesses or residential property holders. We are supportive of the intent of the bill. The way that the bill’s scheme is proposed to work is that the tax will be payable after 10 years after the final payment of stamp duty.

I will take the opportunity today to make some comments about how it is really encouraging to see the government exploring this level of reform in relation to commercial and industrial property, and I will take some time to make some comments on the benefits that we could see if similar reforms were applied in the residential property space.

The Legislative Council Economy and Infrastructure Committee did hold an inquiry into land transfer duty fees, and as I said, I participated as a member of that inquiry. The inquiry recommended that the government further investigate stamp duty reform, and I understand that this bill forms part of the government’s initial investigations and response to those investigations. I will make the clear point on behalf of the Greens that this bill is a positive step, but it is only the first small step of the larger reform that is required. We do need to see a similar transition scheme for residential properties, and we would strongly encourage the government to continue to explore reform in that space.

The inquiry found that residential stamp duty is not only inequitable but far less efficient and predictable than available alternative measures. Victorians would be more willing to move to a home, face less barriers moving to a property that better suits their needs and make better use of existing housing stock if there was a switch to a broad-based land tax. The report says:

Stamp duty is one of Australia’s most costly taxes. It is a substantial share of the Victorian government’s budget revenue, but it is very costly because it generates big distortions in how people behave that affect their lives and then ultimately affect their wellbeing.

The distortions created by stamp duty on residential properties are currently a significant barrier to worker mobility and to stimulating economic growth. They are also contributing to the housing crisis that we face. We know our state is in a housing crisis and that our system is broken. While property developers are left to profit, too many people are locked out of home ownership currently. During the inquiry we heard from the Australian Housing and Urban Research Institute that a transition to land tax would be:

… an improvement for a whole range of reasons.

Namely, they stated:

For first home buyers it eases entry into home ownership. At the other end of the age scale, downsizing is much easier if that hurdle does not play a role again. It allows labour force mobility to be much more manageable because people can move to where their jobs are a lot more easily if there is not an enormous lump sum attached to the purchase of properties. It is more financially manageable, easier for the banking system and easier for everybody.

If Labor is properly committed to ending the housing crisis, then it will use every policy lever available to address housing unaffordability and encourage the equitable allocation of housing so that everyone in our state has a stable and secure place to call home. As I stated at the outset, we see that this is a really positive move to reforming stamp duty as it relates to commercial and industrial property. The Greens will be supporting the bill, and we would encourage the government to progress the abolition of stamp duty for residential property and its replacement with a broad-based land tax. I will conclude my comments there.

John BERGER (Southern Metropolitan) (17:10): I rise to speak on the Commercial and Industrial Property Tax Reform Bill 2024, a critical piece of tax reform for Victoria. In doing so I would like to first congratulate the Treasurer in the other place on delivering another budget that puts families first.

In order to maintain fiscal discipline, we have had to make some tough decisions. This is the hallmark of good governance: knowing how to make the tough decisions and when to make the tough decisions. We are continuing on with our nation-leading reform agenda, and this bill is nothing short of a critical reform for our state. This is a bill which helps modernise our state taxation system by gradually moving towards an annual tax on commercial properties instead of sticking by an inefficient commercial stamp duty. This will be done by the creation of a new principal act as well as by amending several acts currently in force, including the Taxation Administration Act 1997, the Heritage Act 2017, the Property Law Act 1958, the Retail Leases Act 2003, the Sale of Land Act 1962 and the Valuation of Land Act 1960. We announced this once-in-a-generation change in last year’s budget, which included changes to the payroll tax for businesses, changes to insurance duties, and of course this tax reform for commercial and industrial properties. It is all part of our plan to reform revenue away from stamp duty and towards a model which will promote business investment, growth and sustainability.

What we announced was a transition away from stamp duty for commercial and industrial properties in Victoria to lower the barriers to investment by gradually moving these properties to an annual tax on commercial land. We said at the time that Victoria’s economy would grow by about $50 billion as a result of this reform, and it is not difficult to see why. Stamp duty for commercial and industrial properties was and still is one of the most inefficient taxes, driving up the costs of moving a business or investing in the local economy. What we are proposing instead is an annual tax levied on commercial and industrial properties in place of stamp duty at a rate of just 1 per cent of the site’s value. This tax will be introduced gradually and come into effect 10 years after the commercial or industrial property enters this scheme. Commercial and industrial properties will enter this scheme on the completion of their transaction, and then 10 years on, this new tax will apply in place of stamp duty. This tax reform will be in effect a tax cut of $266 million for businesses over the next four years and is estimated to add 12,600 jobs to the Victorian economy as well.

Our reforms are building a stronger economy, with more businesses creating more jobs. This is good for Victoria. Nonetheless the opposition, with their impeccable economic insight, are calling out this tax proposal as unnecessarily high and punitive. To them, the 1 per cent annual tax is simply unacceptable, and in lieu of that they propose a radically different 0.8 per cent annual tax. I cannot quite pinpoint how that proposed 0.2 percentage difference is going to supposedly whip a modest tax proposal from being what the opposition regards as unnecessarily high into an acceptable one. Perhaps it is this line of thinking that led their last government to drive the budget into deficit in stable economic times. If they were serious about growing investment in Victoria, they would be championing how the Allan Labor government is leading the way for stamp duty reform. They would be championing the reforms that we announced alongside this, such as the increased thresholds to the insurance duties and the payroll tax reforms. Instead the opposition has decided to pick a fight over whether a tax should be 1 per cent or 0.8 per cent. They would rather bicker over a fifth of a percent point reduction in tax than have a once-in-a-generation reform which will break forward a path for greater investment in Victoria.

It is interesting that those opposite are trigger-ready to lash against any modest tax proposal from this government regardless of its benefits. By giving these businesses more mobility and lowering the roadblock of stamp duty, we are helping build our commercial sector. That means more opportunities for Victorian workers and that more businesses across Victoria can set up shop easier. We have also heard objections in the other place from the Greens, who took the opportunity to argue the government’s record on housing. I would like to remind the Greens that this reform is part of a broad set of reforms announced last year to spur investment in Victoria. On top of the housing statement, we have been offering eligible build-to-rent projects up to a 50 per cent reduction in their land tax contributions up to 2031, paving the way for not just more commercial investment in Victoria but more investment in housing. This is indisputable, and these reforms are much needed. Even the opposition, who spent a great deal of time lambasting this bill over specific tax rates, have admitted that moving away from stamp duty for commercial property was essential. The move to an annual tax on land value is essential to our continued prosperity.

The Allan Labor government has a strong track record on investing in jobs, in our economy and in our future. We learned in this last budget that business investment in Victoria is going strong. Since the back end of 2020 we have seen nearly 40 per cent growth in business investment in this state, with 13 per cent of growth in 2023 alone. That is more than the rest of Australia, who are averaging less than 30 per cent in the same period. Employment growth is up 18 per cent compared to the rest of the Commonwealth, which sits at just under 13 per cent. The Victorian economy is resilient on the back of strong employment, strong business investment and strong public investment. We are committed to continuing the reform agenda to make sure that we can find ways to make our economy more efficient.

Ensuring that commercial property sold from 1 July will only have to pay stamp duty one more time means it will be easier to set up a business or move your business around Victoria. It will be easier to hire workers and easier to invest in your business’s future. Since 2014 Victoria has created as many as 800,000 new jobs, and that is no accident. It takes initiative from government to invest in jobs and businesses to grow an economy that delivers for Victorians. By making it easier to do business in Victoria we will be helping them invest in thousands of jobs laid out in the budget. That is really what this bill is about, because what is good for small business in Victoria is good for jobs.

Another aspect of this bill that makes it a uniquely effective reform is a thoroughly considered series of measures for transitional support. This transitional support is designed to ensure that this move from stamp tax is as smooth and effective as possible. Part of this is a transition loan that taxpayers can opt into. Taxpayers will have the option of paying their final stamp duty liability up-front or using a government-facilitated loan. This loan will be repaid over 10 years by the taxpayer in annual instalments. The loan will be available for properties worth up to $30 million. This loan will do wonders for small businesses, freeing up capital to be put towards the improvement of their businesses.

The transition loan is another example of an Allan Labor government reform that leaves everyone a winner. I would like to emphasise how this loan is entirely optional. Taxpayers subject to stamp duty have the reins on whether or not they want to pay it now or over 10 years. This decision is entirely in their hands. The transition loan program will be overseen by the Treasury Corporation of Victoria, with matters necessary to the running of the loan program to be determined by the Treasurer. This includes matters like criteria and key lending terms. The loans will be administered by the Treasury as outlined in the amendments that this bill seeks to make to the Treasury Corporation of Victoria Act 1992.

I would like to touch on how this bill was written. Those opposite claim that the reforms in this bill introduce taxes that are too high and punitive. Well, that is a silly assertion. This bill was written following heavy industry consultation. The idea that we should be abolishing stamp duty has been a topic of public discussion for independent think tanks, industry groups and other stakeholders for some time. The resounding consensus, I am sure those opposite will agree, is that this move is a must. Industry experts like Quentin Kilian OAM from the Real Estate Institute of Victoria stated that this reform ‘shows a listening ear to the sector’s call for change’. Cath Evans from the Property Council of Australia referred to stamp duty as ‘an inherently destructive tax that discourages positive economic outcomes for the state’ and then went on to praise the government’s tax reform. Brendan Coates from the Grattan Institute spoke of the reforms last year, calling them ‘very, very significant’.

It is clear that the industry is behind this bill and these reforms, but those across from us do not want it to be. Every part of this bill is therefore before us because it is consistent with the consultation and advice that the government sought from experts and stakeholders. That includes the new rate of tax being introduced. We just do not put forward reforms because we feel like it. The Allan Labor government reform agenda has been constructed through thorough community consultation. This is how Labor governments govern. This is why you can see a marked difference in the quality of governments between a Labor government and a coalition government, especially in Victoria. This bill is an important step in the Allan Labor government’s tax reform. Stamp duty is not serving Victoria as it should be. This new broader land-based tax will be more efficient and better for Victorians.

Other reforms for the Victorian state revenue system have also been introduced from and since the last budget. It has been a big part of the Allan Labor government’s platform. This goes back to the idea I spoke about earlier: making tough decisions. That is what all tax reform is. It is important, though, that we have a good government and Treasury in charge of introducing taxation reforms when they are needed, a good government and Treasury that can look at these tough decisions and deliver the outcome that is best for everybody. That is what the Allan Labor government delivers for Victorians – taxes that deliver unique, real-world outcomes, like the vacant property tax, which will encourage countless property owners to introduce new rentals onto the market. This will help ease housing pressures in Victoria adjacent to the introduction of hundreds of thousands of homes across Victoria, courtesy of the housing statement. Tax reform under the Allan Labor government leaves everybody in Victoria better off.

This tax reform is not just about ensuring fairness in the collection of revenue – revenue that funds our essential services, such as hospitals and police – it is about creating a tax system that promotes businesses, lets businesses grow and helps businesses thrive. This will forever change Victoria for the better. It will change Victoria by giving more opportunities for businesses to improve. As has been stated, what is good for business is good for jobs. This government has put a lot of work into improving employment in Victoria, and it has paid off. Along with building our state’s infrastructure, the Allan Labor government’s Big Build project has generated roughly 50,000 jobs for people across Victoria. This includes direct and indirect employment in regional and metropolitan areas.

The Allan Labor government has also introduced initiatives that support employment in the long term. Programs like free TAFE ensure that more Victorians have access to education and training programs needed to get qualifications. This makes it easier for individuals to find employment. We have introduced subsidies for courses in fields like nursing and early childhood teaching to give individuals who want careers in these fields a little more help getting in the door, even offering grants to student-teachers seeking placements in rural or regional areas. Whilst not tax reform, these programs and initiatives have similar outcomes that this bill will deliver, and they are jobs.

The Allan Labor government has also introduced and supported programs and grants designed to support all small businesses and to help them thrive. This includes the Made by Many Minds online network for multicultural women in business, which is proudly supported by the Allan Labor government. It also includes funding for flood-affected businesses and grants for business councils to invest in supporting the mental health of small business owners. This bill is just another demonstration of how committed this government is to supporting small business. Whilst discussing Small Business Victoria, I would like to take a moment to commend my colleague and good friend in the other place Minister for Small Business Natalie Suleyman. As the Minister for Small Business, Minister Suleyman is deeply passionate about business in Victoria and is a very big believer in delivering reforms like those before us in this bill which improve conditions for small business in Victoria, reforms that remove roadblocks – stamp duty – and just make it easier to run a business in this great state.

To finish my contribution, I would like to reiterate the basics of what this bill is: getting rid of an inefficient mode of state revenue collection by introducing an effective new property tax – a tax that is fairer for business while still making sure that we can fund important services like schools and hospitals, a tax that supports small and medium businesses, helping them thrive and expand so they can employ more Victorians. I commend the bill to the house, and I urge all of my colleagues to join me in voting in support of it.

Gaelle BROAD (Northern Victoria) (17:23): I rise to speak today on the Commercial and Industrial Property Tax Reform Bill 2024. I was speaking with an artist recently who worked for months on an oil painting. They were trying to perfect it but actually ruined the painting. They just kept trying to add and add and they went too far, beyond repair, kind of like this government with the property market. Because Labor has continued to add paint. They have made changes here and there and ruined the picture.

I have spoken to real estate agents who are frustrated. This is a government that likes to take control and interfere – dabble here, dabble there – but after 10 years in government they have created a perfect storm in the property market. The state government made over 100 changes to the Residential Tenancies Act 1997. I have spoken with real estate agents who say, ‘Yes, you can kind of have anything, including a zoo, in houses now.’ There has been a significant cost to landlords who are unable to retrieve the losses on insurance for damage. There is a growing waitlist for VCAT, so they have added a bit more paint through the introduction of Rental Dispute Resolution Victoria. Then we have got the land tax changes, and property owners who are landlords are leaving the property market, which is reducing the rentals available. Another bit of paint that the government has been adding is major infrastructure projects in the city that are draining the workforce, particularly in the building industry, and it has been hard for the private sector to compete with wages and also the supply of goods. I have read news reports that talk about delays on some projects of up to 12 months.

While it is not in my patch of Northern Victoria, I am very concerned about the government’s decision to knock down the 44 housing towers in Melbourne, and when asked questions about where these people are going to live while their homes are knocked down and rebuilt, the government says they are asking the residents where they want to go. It is rather important to work that out, because it is certainly stressing people out. The government’s reason for knocking the towers down is that they are not up to standard, but most people would prefer to have a roof over their head than no roof at all. I know certainly in Bendigo homelessness is on the rise, and some people have moved from Melbourne. Some work full-time, sleeping in cars, and there are students that are couch surfing. We have had families impacted by floods who have lost their rental and need somewhere to call home, and we have got people living in tents in the bush.

Keep in mind that we already pay the highest property taxes in Australia. This bill will commence from 1 July 2024 – another few brushstrokes that accountants need to get their heads around as people consider purchasing commercial or industrial property. It has been full on for accountants under this government. We have had over 50 new or increased taxes in the last 10 years and nearly half of those on property.

This bill provides for people purchasing commercial and industrial property to take out a loan. I must admit I am not very confident in the government’s ability to get the paperwork right, because I know local councils that are still waiting for roads funding to be approved and it has been 18 months since the major flood events that hit northern Victoria. They are wound up in red tape, and they need to provide a mountain of evidence to prove their case.

I note on the government’s website that the loan will be issued by the Treasury Corporation of Victoria at a commercial interest rate. It states that:

Further information on the transition loan, such as the application process and loan terms and conditions, will be published by the Treasury Corporation of Victoria prior to the commencement of the reform on 1 July 2024.

It is already mid-May, and if this bill passes it certainly does not give much time for people to understand the options and the detail behind these changes.

Another matter to highlight in this bill is the restrictions placed on questioning an assessment, as proceedings in relation to any assessment of the commercial and industrial property tax would be similarly limited. It limits the jurisdiction of the Supreme Court, similar to other Victorian taxes. When you consider the failures of this government in getting land tax assessments correct, the clauses that restrict the right of appeal should raise concerns – when you look at the track record of the changes to land tax when they reduced the valuation threshold from $300,000 to $50,000 – because right across Victoria people are receiving land tax bills for the first time. It is very important that if you receive one, you check the liability before paying, because they are being incorrectly issued to people, organisations and community groups that are eligible for exemptions or not required to pay at all. I spoke to a lady who received a bill from the State Revenue Office based on a property subdivision by former owners that never went through. She has written to the SRO and is yet to receive any acknowledgement of the error.

On our side of politics we certainly believe that taxes should be lower, fairer and simpler, and at the high level it does sound straightforward to replace stamp duty with an annual tax, but this bill is very complex. It is a complex proposal that starts, as I mentioned, from 1 July 2024 with a 10-year transition program and then the implementation of a new tax – the CIPT, the commercial and industrial property tax – from the tenth year. The government proposes that the rate of that tax will be set at 1 per cent of the unimproved value of the property for the life of that property, so it is an ongoing tax.

Our amendment, as Evan Mulholland spoke to earlier, is to reduce the rate from 1 per cent to 0.8 per cent and also provide a concession for regional areas at a reduced rate of 0.4 per cent. We do need to maintain and build the incentive for businesses to move to regional Victoria, because it is so important that we become a state of cities, not a city-state, which we are certainly seeing under this government. I want to thank Brad Rowswell for his work on this bill as the Shadow Treasurer and his engagement with industry on this issue. I am aware that industry does welcome the change that this bill provides for when purchasing commercial property to avoid the up-front cost of stamp duty and defer costs, but as Evan Mulholland indicated in his contribution, there are concerns that we will end up raising more revenue and this will be an opportunity for the government to do so because this is a government absolutely drowning in debt. Our state net debt is projected to rise to $187.8 billion by 2028. We are currently paying over $15 million every single day in interest. Very soon that is going to be up to $18 million, and then by 2028 nearly $26 million every single day on interest repayments. That $9.7 billion interest bill will be about 8.8 per cent of the government’s total revenue. That is money not going to services like police, hospitals, ambulances and schools – it is going nowhere – because of this government’s financial mismanagement. If interest rates go up again, it will only get worse.

We agree with the principle of this bill. I understand that stamp duty on industrial properties is a burden, but the reforms proposed in this bill are unnecessarily complex. On Mother’s Day I enjoyed seeing the Leonardo da Vinci exhibition at the Lume. He was a master artist, sculptor, architect, engineer and inventor. He was and still is considered a genius and a keen observer of life. He applied his knowledge across a range of fields. If only Labor would learn by observing what is happening in this state. They do not seem to be aware of the impact of their policies over the last 10 years and the impact that they have had on real life and on the cost of living for every Victorian, because it continues to rise. It is time Labor observed the impact of their policies on other fields and that everything they do, particularly adding tax upon tax upon tax in the property sector, is having a flow-on effect and contributing to the housing crisis in Victoria. Victorians already pay the highest taxes per person of any state in Australia, according to the ABS, including the highest property taxes per capita in the nation. It is clear that Labor cannot manage money.

I note that John Berger in his contribution mentioned that Labor was all about consultation. That could not be further from the truth, because I have heard time and time again from people in different inquiries saying this government is all about being consultold. It is certainly not about consultation. Labor cannot manage money. Every year in government Labor have spent more than they earn. If you were in business, you would be out of business. In 2026 I hope that Victorians will ensure that you are out of government.

David LIMBRICK (South-Eastern Metropolitan) (17:33): I also rise to speak on the Commercial and Industrial Property Tax Reform Bill 2024. This is rather unusual, and I must admit rather uncomfortable for me, because this is the first tax bill since I have been in this place that I am not going to oppose. I am very glad that the stamp duty inquiry that was initiated by the Libertarian Party last year got a bit of discussion around stamp duty happening, and I think everyone is in universal agreement that stamp duty is an awful tax – an inefficient tax that causes capital misallocation and all sorts of other problems.

Harriet Shing interjected.

David LIMBRICK: Distortionary effects – thank you, Ms Shing. But the government has decided to act, albeit in a rather modest way – far more modest than my minority report recommendation, which was to abolish stamp duty and replace it with absolutely nothing and couple that with a commensurate downsizing of the size of the state. The government is not going to do that, although I note that South Australia might have been listening because they decided to abolish commercial and industrial property tax and replace it with absolutely nothing. Maybe they read my minority report. Nevertheless, this change will, I believe, increase efficiency. As has been noted, stamp duty is a very inefficient tax. It results in capital misallocation. In the case of housing – residential, which we are not talking about today – it causes problems like people living in houses that are too big or too small or living too far away from work. But in the commercial and industrial space it means that people like factory owners may be unwilling to move to a more suitable site for their factory or upgrade it. They may be unwilling to move premises for their business. This will indeed make that more efficient.

When I came into this place, in my first speech, as every Libertarian Party member does, I made a public promise to never vote for an increase in taxes. This bill does not increase taxes. Indeed over the four-year estimates period my understanding is it will result in about $260 million less tax revenue, which would otherwise be collected by stamp duty. It is unfortunate that the government will be picking this up in other taxes in another tax bill coming through soon, but nevertheless I do believe this modelling because it makes sense, because the initial transaction on a commercial or industrial property will attract stamp duty but subsequent transactions will not attract this stamp duty and therefore that will result in a loss in revenue for the government over the short term. I know that some in the opposition believe that over the long term this will result in an increase in overall taxation. Let us hope that a future government puts a stop to that, but nevertheless in the short term it will not result in an increase in taxation – quite the opposite – which means that I am safe to not oppose this.

I will talk briefly about one of the features of this bill which has been spoken about by a number of members, which is the ability for someone who is liable for stamp duty under these reforms to take out a loan. I note Mr Mulholland’s comments about the risk premium and the appropriateness of that. I do agree with the government and the opposition that it is appropriate to have a risk premium – otherwise it will be taken up by others. I also note Mr Mulholland’s comments that it may be possible for a future Treasurer to just pull this risk premium out of thin air, and I appreciate that. But I would temper that with the consultations that I have done, especially with groups that represent commercial property trusts and industry super funds that do large-scale investments, particularly in commercial property. Many of these funds are actually prohibited from taking out loans, and they will not take up this option. It is my prediction that actually most transactions would not take up this loan option, and I doubt it would be very popular. Certainly for smaller scale transactions like for factories and the like, many of these are already financed by debt. It would be difficult to add in more debt on top of that. It is probably easier for them to just pay the stamp duty up-front and finance it that way. So I think it would be unlikely that this option would be popular. Nevertheless it is there if people want to take that up – they have that option – so I do not see it as problematic.

On the issue of the opposition’s amendments around the transparency of that, I will be supporting that, and of course also the opposition is putting forward amendments to lower the rate to 0.8 per cent for metro properties and 0.4 per cent for regional properties. I will be supporting these amendments. I believe that we should be lowering this tax, as low as possible – preferably abolishing it, like South Australia – but due to our poor financial state it appears that the Treasurer has decided at this point in time that is not possible. But I hope that we do get in a better financial state in the future, and one of the ways that we can do that is by slashing spending.

I note that in the latest budget – and we will be talking more about the budget next sitting week, I believe – the size of government as a proportion of gross state product has reduced. I was very happy to see that, although again it is quite modest. I would prefer to see far more radical changes, but nevertheless it is in the right direction, and that is a good thing for once. Therefore on this historic occasion, I am a Libertarian supporting a Labor tax bill. I will finish my contribution there.

Michael GALEA (South-Eastern Metropolitan) (17:39): Flushed with the unanimity of the house, it seems, it is good to hear the comments of my colleague Mr Limbrick in supporting this government taxation bill, which I am very, very pleased indeed to hear. I also do rise today to speak on the Commercial and Industrial Property Tax Reform Bill 2024. In doing so I would also like to acknowledge the very hard work of the Treasurer and his team in putting this together. This announcement was made last year and is due to come into effect on 1 July this year, as other members have referred to. I know that a power of work has gone into this, so I just acknowledge that at the outset.

We of course had another budget last week – another budget that strikes the right balance in being responsible with the state’s finances whilst delivering the services and the infrastructure that all Victorians need, especially those in growth areas, such as the ones that I am privileged to represent in this place. I look forward to many further contributions about those investments, including the two new schools that we will be getting in Clyde North. I know Mr Tarlamis and I are very excited about the sheer scale of investment into our growth areas.

The matter at hand today is of course in relation to land transfer duty, better known as stamp duty, as it affects commercial properties and industrial properties. It is very good to see, indeed as others have noted, once again Victoria taking a lead on this and being the first state to announce its intentions to step away from what is one of the most regressive forms of taxation by replacing Victoria’s land transfer duty with this new scheme. As others have gone through, it will provide transitional arrangements and options for paying stamp duty at first before moving to this new system of property taxation 10 years after the first sale of a property, once the bill comes into effect.

It is a fundamental and long-awaited transformation of our state’s taxation policy as it relates to businesses. It will be overhauling the taxation framework which governs these properties and will be fulfilling that commitment which was, as I said, made in the 2023–24 budget to progressively abolish stamp duty on these properties and replace it with the annual tax. The new tax system will apply to any transactions with a contract and settlement date on or after 1 July this year. The commercial and industrial property tax will be set at a flat 1 per cent of the property’s unimproved land value, with no complicated rate schedules or thresholds. Central to this bill is that the commercial and industrial property tax will effectively abolish that stamp duty on commercial property transactions. Stamp duty payments will be made for a final time, paving the way for a 10-year transition period during which this newly proposed property tax will take effect. As we of course transition to these new arrangements, the eligible purchasers will be able to access loans to cover any up-front stamp duty costs. These purchasers will have the choice to either pay an up-front sum or to finance that with a loan through a government-facilitated transition loan program, which will allow them to make annual loan repayments over the 10 years equivalent to the property’s final up-front land transfer duty liability plus interest.

The Treasury Corporation of Victoria will provide the loan on commercial terms, including a fixed market-based interest rate. Annual repayments over 10 years will be set up-front to provide applicants with the certainty they need. That loan will of course be of particular benefit to the many, many small- and medium-sized businesses and will allow them to be more agile – not just in 10 years time, which is when the full effect of these changes will come in, but in the nearer term as well. It will still allow them to have the same benefits that we foreshadow all businesses to have in the longer term under this legislation. We are not making businesses wait; we are providing that in the nearer term as well. It will be available for any property with a purchase price of up to $30 million. Currently when you acquire a commercial or industrial property in this state, you do pay stamp duty. This of course is in addition to the other costs associated with purchasing property, and in terms of commercial and industrial properties specifically, this can have a particularly detrimental effect on business. It discourages investment that would otherwise help to further fuel the growth and productivity we have seen in Victoria, noting of course that we already have and still continue to see very strong economic results. In fact with our unemployment rate at under 4 per cent in regional Victoria, at about 3.7 per cent, and at 4.1 per cent statewide, we are continuing to see the effects of this government’s reforms, particularly in regional areas.

There has been some discussion of regional areas and regional taxation as well, and I would make the point that when the coalition were last in office, 10 years ago, they were quite happy for regional Victorian businesses to be paying the same payroll tax as their metropolitan counterparts, that same 4.85 per cent. This is a government that has not just once but repeatedly reduced that rate of payroll tax that regional Victorian businesses have to pay so that it is now just 1.2 per cent. That 1.2 per cent is less than a quarter of what they would be otherwise paying if they were in the metropolitan area or less than a quarter of what they would be paying under the policies of those opposite. That is the figure which those opposite decided was the appropriate rate.

This is a government that supports regional Victoria as it does all Victorians, and I note that particular example speaks for itself. You can see the unemployment rate of regional Victoria is currently at 3.7 per cent, and it has for some years now been at pretty much near record lows, a great result. That is what happens of course when you invest in your regions, when you provide incentives such as reduced payroll tax but also when you provide the infrastructure and the services. Mr McIntosh and I have been privileged to take part in an inquiry that has recently been looking all around regional Victoria and seeing the optimism and the investment that has been taking place – investment that is still to come, mind you, as well – and indeed hearing some of the good problems you have from all this unprecedented demand for people to move into the area or for people to visit. Whether it is the Ballarat biennale or whether it is skyrocketing demand for people to move to our regional cities, you are seeing great optimism around those places. That is why it was great to see and obviously to hear about what their challenges are but also quite remarkable to see the current state of their local broader economies as well as specifically their visitor economies and to see just what happens when you have a government that does not regard country Victoria as the toenails of Victoria, that actually invests in regional Victoria, that does not close the Leongatha train line, that does not close the Mildura train line and that does not close the Bairnsdale or the Maryborough train lines, both services which were reintroduced by Labor governments.

When you have a government that actually invests in regional Victoria, when you have a government that reduces that payroll tax to incentivise more jobs in regional Victoria, you get more jobs in regional Victoria and you get more people in regional Victoria. You get more investment in regional Victoria as well. Businesses across the regional parts of our state continue to benefit from those very foresighted reforms by this government, by indeed this Treasurer, and we are seeing the results of that. As I say, like in all parts of our state, there is always more that we can do, and it has been a privilege to, along with Mr McIntosh, take part in that inquiry and really get to grips with some of the things that we can still be doing better to invest in those communities and hear about what they want – about those community sporting facilities in particular.

Tom McIntosh interjected.

Michael GALEA: Not nuclear power plants indeed, Mr McIntosh. I know that the residents of Mount Eliza in your region and Frankston in my region certainly emphatically voted against nuclear power plants on their doorsteps at the Dunkley by-election just a few months ago. How wonderful it is to see the outstanding member for Dunkley Jodie Belyea already making a very big impact in that community that Mr McIntosh and I also get to share in that part of the world – and indeed Mr Tarlamis of course as well.

When you have governments that go to regional Victoria with renewable energy projects as opposed to nuclear power plants, you also get a good response. You get a better response than if you go saying, ‘We want to build a Simpsons-style Springfield nuclear power plant on your doorstep or the equivalent of the one that they have just built or are still building in Somerset in the UK, which has cost about $68 billion.’ That is a ridiculously obscene amount of money when you could be better investing that into the services and infrastructure that regional Victorians need, which is exactly what we are doing of course, and that is exactly why we are seeing those trends from regional Victoria. So whilst I do take on what Mr Mulholland is putting forward and note what he has put forward in his amendment, I would say that we are actually doing that work already. We are showing that through payroll tax, and that is of much more significant value to regional businesses than merely adopting your model for this but then reverting to the 4.85 per cent payroll tax, which, as I say, was what was left by the coalition and was sustained by that side of politics when you were last in government. It was 4.85 per cent when the Andrews Labor government came in, and it was progressively reduced three or four times down to 1.2 per cent, and that is where we see the 3.7 per cent unemployment rate, which would have been unimaginable under the previous Liberal administration – even more unimaginable under the Kennett government of course, which cut everything it could out of regional Victoria.

But as I say, returning to stamp duty, which is what this bill is of course all about, this is a sensible, straightforward review. It is good to have indeed even the support of the Libertarian Party in that as well and indeed from Ms Copsey, from the Greens, from her comments as well, and it shows the value, that we have got wide support for this. This is a sensible change. We even have support on record from VCCI, the Victorian Chamber of Commerce and Industry, with their CEO Paul Guerra saying:

This is exactly the type of progressive tax reform that is required to free up stamp duty charges which will accelerate building upgrades, stimulate investment in commercial property and free up more capital …

He further went on to say that the Allan Labor government reform was:

… a bold, yet pragmatic move which will stimulate commercial property investment, development and upgrades by making more capital available.

I think that pretty much succinctly puts into context what it is that this bill achieves. It is about making business more agile, more nimble, giving them the support that they need, taking away that big barrier of stamp duty both in the near term by providing flexible options, whether it is paid up-front or through a loan with the Treasury corporation. But also, more importantly, those are interim measures that we are putting in place so that we can move towards that system 10 years down the track after that purchase and we will actually have a much more progressive ongoing rate of property tax, at 1 per cent of the unimproved value of the land.

We have also heard of course further support, including from Quentin Kilian from the Real Estate Institute of Victoria, Cath Evans from the property council, Brendan Coates from the Grattan Institute – and I do not often like to quote them in this chamber, but sometimes indeed I am happy to do so. They are quite right, even if I disagree with their anti-rail agenda.

But as has been discussed, this bill sets out how this reform will be introduced, and it lays out the framework for how that will take place.

Evan Mulholland interjected.

Michael GALEA: I will take you up on that interjection, Mr Mulholland – the Suburban Rail Loop is a fantastic thing to see as well, which is going to support in particular constituents of the outer suburbs, meaning that people in places such as Cranbourne and Clyde North and Berwick will be able to get to Monash Uni, to Deakin Uni, to jobs in Glen Waverley, to Box Hill, to wherever it is they need to go. We have long had a radial network in this city and long had objections that we need an orbital rail link, and unlike those opposite this is a government that actually gets on and makes those changes, that makes those improvements that will improve people’s lives for the better. The Suburban Rail Loop is an excellent example of that, as you rightly say, Mr Mulholland, because it is not just about getting from one place to another across the suburbs, it is about how we get across from the outer suburbs and indeed from regional Victoria as well. I know, Mr McIntosh, your constituents will be able to benefit too from quicker access to Monash University, Cheltenham, Deakin University, Glen Waverley and other parts as well – all of those regions will be opened up by the Suburban Rail Loop without constituents having to go in and make that notorious change at Richmond. It is a great project as well. Even if the Grattan Institute cannot see the benefit of it – they probably would not have seen the benefit of the city loop either or probably even the Flinders Street viaduct or extending the train line to Glen Waverley or Pakenham or Sandringham back in the day – it is good to see them supporting this sensible tax reform amongst many voices in support of this. I do commend the bill to the house.

Trung LUU (Western Metropolitan) (17:54): I rise to speak to the Commercial and Industrial Property Tax Reform Bill 2024. On this side of the chamber we believe the way to get Victoria back in business is axing the taxes that are suffocating small business and smothering the aspirations of hardworking Victorian families. Abolishing stamp duty on commercial and industrial property in this state is most welcome, but replacing it with a broad land tax is still a tax in a slightly different form – in this case with a 10-year transition. Nevertheless it is acknowledged that this reform will make it easier for some businesses. However, a wonderful well-known Australian businessman years ago said about introducing a new law that if a government wants to introduce a new law, they should repeal the old one. He certainly was not referring to taxes. This government seems to be taking one off and putting another one back on the table. In the last 18 months Victoria has seen a decline of 8000 businesses, a stark indication of economic turbulence. The attempt to reduce a single tax seems ineffective against the weight of 53 new taxes introduced by this Allan government. Notably, the property sector, representing a massive proportion of the economy, has been affected by nearly half of these economic measures.

It is a straightforward formula that anyone can grasp that the more tax you impose on economies, the more jobs you will lose. The situation is intensified by the collection of promises made by Daniel Andrews back in the 2014 election campaign. He committed to not raising taxes or introducing any new taxes. This affirmation, pledged to all Victorians, now echoes with the overtones of betrayal as decades later there are 53 new or increased taxes, with a reduction in business numbers hard to ignore.

The Allan government has frequently emphasised its housing initiatives, yet the property market is struggling under the weight of 23 new taxes imposed in the last 10 years. This rising tax on the property sector directly impacts home ownership and places a heavy tax burden on small businesses relying on commercial real estate.

I recall the Sir Winston Churchill quote:

… for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.

Clearly the government has not listened to these wise words.

I just want to mention that, when I say ‘taxes’, there are so many taxes this government has introduced that go straight into property costs that affect businesses and families – the land tax, the COVID tax, the fire services tax, the congestion tax, the metropolitan tax, the windfall tax, and the list goes on. When too many taxes are applied to buying property, it makes it harder for people to make investments in it. Taxes are stealing the opportunities of Victorians and making it harder for everyone to invest and feel comfortable.

The 27 new taxes, as I mentioned, are the reason for the amendment of the bill as suggested by my colleague Evan Mullholland, just to alleviate some of the burden which Victorians are facing. A strong commercial property market is built on the back of investor confidence. When investors are not confident, the market’s momentum falls. The government is selling this reform as a golden ticket that will bring Victorian businesses back by removing the stamp duty tax, but there are also other taxes and regulations that Victorian businesses have to navigate. This makes it harder and harder for new businesses to start, forcing more businesses to shut down and move to other states. All these tax rules make it tougher for businesses in Victoria to succeed and for the economy to grow.

I will make this short. On this side of the chamber we believe in lower taxes to grow economies. So we are not opposed to this bill, but we still have a long way to go in tax reform with this government. We want Victoria to get back to business. I hope this bill will assist Victorian businesses and families to achieve their aspirations.

Sheena WATT (Northern Metropolitan) (17:59): Acting President, thank you very much for the opportunity to join my colleagues and make a contribution on the Commercial and Industrial Property Tax Reform Bill 2024, which will reshape the taxation framework for commercial and industrial property in Victoria. This proposed legislation marks a significant departure from the conventional stamp duty approach, transitioning towards a more efficient taxation method. When the Treasurer, Minister for Industrial Relations and – of course most pertinently to the bill before us today – Minister for Economic Growth introduced this bill into the Assembly, he did so in the great tradition of the government of ongoing reform to aid the development of our state.

Currently purchasing or acquiring commercial or industrial property in Victoria incurs a land transfer duty, commonly known as stamp duty. Stamp duty increases property acquisition costs, and particularly for commercial and industrial properties, acts as a deterrent to businesses seeking to invest, expand or relocate, hindering overall growth and productivity. Reforming stamp duty has been advocated by various inquiries over recent decades, and I am thinking about the Productivity Commission and the Henry tax review. Transitioning from stamp duty to the commercial and industrial property tax will serve a range of functions, including encouraging business to expand or establish operations at optimal locations, such as close to their customer base or in areas with a growing workforce. Supporting businesses and investing in buildings and essential infrastructure foster more efficient utilisation of commercial and industrial land.

In essence this change means a retailer is more likely to purchase new properties for business expansion or a transport company will find greater incentive to move into a larger warehouse space. By removing a significant barrier to effective investment, the positive effects will ripple across the economy. Eliminating up-front costs associated with commercial and industrial property acquisitions will expedite business growth and job creation. The cumulative impact of the reforms is expected to increase the size of the Victorian economy by up to $50 billion in net present value terms.

I am proud to be associated with the first government in Victoria’s history to spearhead an initiative to eliminate stamp duty on commercial and industrial property here in our state. In addition to the inquiries that I spoke of earlier, such as the Henry tax review, the concept of replacing property transaction stamp duty with a comprehensive land-based tax has garnered really extensive backing from various independent think tanks, policy analysts and of course industry bodies.

This reform really does represent a transformational shift. It transcends mere adjustments to tax policies, offering an alternative approach to taxing commercial and industrial properties that will facilitate business growth and expansion. It will simplify the process for businesses looking to expand or establish themselves in prime locations, such as close to their clientele or in fact some areas where there might be some workforce growth, which is always a very good thing.

According to economic projections, this reform is anticipated to generate substantial economic benefits over the next four decades, and by then it is estimated that Victoria will have created 12,600 new jobs and contributed a cumulative net present value of $50 billion to the Victorian economy. As my colleague the member for Pascoe Vale remarked in the Assembly when this bill was introduced there earlier in May, the commercial and industrial sectors play a crucial role in driving economic prosperity across the Northern Metropolitan Region. Collectively there are 16,000 local businesses contributing to a local gross regional product of $7 billion and nearly 50,000 jobs, which is just extraordinary.

Removing the barrier of stamp duty will facilitate more effective investments in these sectors, multiplying benefits throughout the economy and across areas like Pascoe Vale, Coburg and Brunswick West. Over the next four years businesses are expected to pay around $260 million less in stamp duty due to this reform, fostering increased commercial and industrial development across the northern suburbs of Melbourne.

The proposed legislation establishes a new principal act aimed at providing the necessary legal frameworks to effectively implement and manage this reform. It will also facilitate the transition of commercial and industrial properties from stamp duty to a more streamlined tax system. Additionally, the bill includes amendments to several existing acts. There are a few here that certainly come to mind. I am thinking of the Duties Act 2000, the Treasury Corporation of Victoria Act 1992, the Taxation Administration Act 1997, the Valuation of Land Act 1960, the Heritage Act 2017, the Property Law Act 1958, the Retail Leases Act 2003 and the Sale of Land Act 1962. My gosh, I have got to say the development of this bill certainly aligns with the public announcement of the reform. During the 2023–‍24 budget period some of us may recall that extensive external consultations were conducted with key stakeholders and industry groups to ensure the reforms design adequately supported property owners throughout the transition process.

The proposed legislation outlines a new tax system targeting commercial and industrial property transactions with contract and settlement dates on or before 1 July 2024. Under this system, stamp duty will be paid for the final time, and a commercial and industrial property tax will become due 10 years after the last stamp duty payment irrespective of subsequent property transactions – there we go. In the event of a property being sold again for commercial or industrial purposes, stamp duty will not apply. To facilitate transition to the new tax system, eligible purchasers of such premises will have the option to access a government-backed transition loan to cover up-front stamp duty costs if desired. The reform is structured to be revenue neutral over time, with the property tax revenue replacing that from stamp duty.

The bill defines eligibility for entry into the reform scheme and for when transactions will bring properties into the scheme, taking effect, as I said, on 1 July 2024. For the first time commercial and industrial properties are transacted on or after that date, 1 July 2024, a final stamp duty liability will be incurred, and the property will automatically enter the reform scheme. A 10-year transition period will commence upon settlement of this transaction, after which property tax becomes payable. At settlement, purchasers will pay the property’s final stamp duty liability up-front through self-financing or a government-facilitated transition loan. If opting for the loan, the amount will cover the full stamp duty payable at settlement, with fixed annual repayments over 10 years including interest.

The bill amends the Duties Act 2000 so that future property transactions involving reform scheme properties do not incur stamp duty provided they maintain a commercial or an industrial use. A property enters the reform scheme if post 1 July 2024 a contract of sale is executed involving at least 50 per cent of the property with a positive stamp duty liability and a qualifying commercial or industrial use at settlement. Certain transactions like corporate restructuring or consolidation eligible for concessions are exempt from triggering entry into the reform scheme. This ensures an ongoing tax liability does not result from the restructuring of corporate groups for the purposes of improving efficiencies.

The bill will also ensure that certain transactions do not trigger entry into the reform scheme. I am thinking dutiable lease transactions and others. Property is also not brought into the scheme through stamp duty exempt transactions, such as deceased estates – that is important to note – transfers to spouses or partners or purchases by charities and friendly societies – there you go. Existing stamp duty concessions will continue to apply for the final stamp duty liability on properties. This includes the stamp duty concessions for properties purchased in regional Victoria for commercial, industrial and extractive industry purchases – there we go. A property will qualify as commercial or industrial use if assigned an Australian valuation property classification code – that is really important to note – that indicates commercial, industrial, extractive industries or infrastructure and utilities land. They are codes falling in the range of 200 to 499 and 600 to 699, for those that are familiar enough with it.

I just want to add further that student accommodation, despite being a non-qualifying code, will be included if solely or primarily used for commercial residential purposes and to house tertiary students during that time. Properties with mixed uses undergo a primary use test to determine entry into the scheme upon a qualifying transaction. Consolidated properties inherit reform scheme status if 50 per cent or more is in the scheme; similarly, lots subdivided from a parent company will inherit the reform scheme status applying to the parent, so that is something certainly worth considering by us in the chamber today. You see, the Commercial and Industrial Property Tax Reform Bill 2024, with the bill as it is right before us now, establishes the property tax applicable 10 years after the settlement of the entry transaction. It replaces stamp duty and applies solely to commercial and industrial properties that are in this scheme, and I cannot stress enough to the chamber that it does not extend to properties primarily for residential use. Exemptions akin to those for land tax will apply – for example, for properties used primarily for primary production, community services, sport and even heritage and culture. The property tax rate is a flat 1 per cent of the property’s unimproved land value per annum, separate from and in addition to the existing land tax regime, and will be without a tax-free threshold. My gosh, that gets me every time – a tax-free threshold.

Payment options will mirror those for land tax, annually or in instalments. For mixed-use properties, if subject to property tax, it applies to the entirety of the property value. The bill also amends, as I said earlier, the Retail Leases Act 2003 to treat property tax like land tax, thereby barring its being passed through to certain tenants subject to a rental lease. Passing property tax to residential renters will be prohibited under the bill before us today. Amendments to other acts will ensure consistency with property tax treatment and allow for necessary reform administration.

When the government announced work had begun on these reforms back in 2023 the Victorian Chamber of Commerce and Industry chief executive Paul Guerra came out publicly and said:

The Victorian Chamber has been working with the State Government on this landmark and generational productivity reform which businesses across Victoria will welcome.

This is exactly the type of progressive tax reform that is required to free up stamp duty charges which will accelerate building upgrades, stimulate investment in commercial property and free up more capital.

That is the CEO, I believe his title is, of the chamber.

Since then the government has actively sought input from other key stakeholders within the property, real estate and financial sectors. Consultations included discussions with policy advocacy groups, other chambers of commerce, representatives from planning and local government and experts in law. Feedback gathered from these sectors played a crucial role in shaping the final design of the reform. This collaborative effort ensured that the reform was tailored to maximise economic benefits for Victoria while providing strong support for businesses.

I have more that I can contribute to the bill before us, but I understand that there are other enthusiastic speakers waiting to make a contribution on the bill. What I will say, though, is that pending parliamentary approval before us today this reform is scheduled to commence, as I said, on 1 July 2024, and in preparation for this milestone the government will provide comprehensive educational support to industry stakeholders and taxpayers to aid in navigating the complexities of the new scheme and of course its transformative impact across our state.

It is important to note that this reform applies exclusively to commercial and industrial properties, as I said, and transactions with contracts finalised before 1 July 2024 remain unaffected. This clear delineation ensures that previous property purchasers awaiting settlement are not impacted and prospective purchasers are fully informed about the new tax framework before entering into contracts. This historic reform marks Victoria as the first state government to abolish stamp duty on commercial and industrial properties, aiming to spur business investment, job creation and productivity growth in the state while supporting businesses in a sustainable way. And with that, I commend this bill to the Council.

Richard WELCH (North-Eastern Metropolitan) (18:14): I am pleased to rise and speak on this bill. Stamp duty has many flaws, it is certain. It is an anachronism deeply embedded in our state’s finances and needs reform, just as much as the nation needed taxation reform prior to the Liberal Party’s delivery of a broad-based consumption tax, the GST. But the similarity ends there. While the groundbreaking GST reforms removed a number of inefficient taxes, FID, state duties and sales tax, and consolidated them – that is, making business simpler and fairer – the new tax is remarkably puny in its thinking and in its vision. It is a puny-minded new tax instead of what this state needs, which is meaningful tax reform. This bill could have been an opportunity to do so much more. A broad-based property tax would have considered a much wider range of efficiency gains. If the government was not an exhausted shell of a government lumbering from one mistake to another, it might have had the imagination to undertake tax reform holistically, but it cannot and it is not, because puny minds deliver puny reforms, and puny reforms inevitably do not deliver reform at all. Puny reforms end up adding complexity instead of removing it.

Industry have expressed concerns at the short period of implementation provided, as it comes into force on 1 July. Industry have also pointed out that under this new added tax both the existing stamp duty and the new property tax regimes can operate together indefinitely, and now we will not have one system; we will now have two, indefinitely. It is not net neutral as a revenue measure, because under this government tax reform means one thing: raise taxes. Tax reform under this government means: raise taxes. That is this government’s definition. This is not a measure to reduce the impost of government spending and intergenerational debt on the lives of Victorians, let alone Victorian businesses; this is a measure to increase it. If you hold property for more than 15 years, you are worse off. If you are a regional commercial property owner – and Lord knows we need more investment in commercial property in the regions – you are worse off. Indeed modelling shows that if this was a revenue-neutral reform, the rate would have been no more than 0.8 per cent and to maintain equity for regional businesses the rate should have been half of that again in regional areas, of 0.4 per cent.

One thing is clear and obvious as a consequence of this change. There will be no cost relief to tenants because this is the perfect catalyst for property owners to pass on the annual costs imposed on them to the occupiers, themselves businesses with their own cash flow and capital management changes. We could also discuss the base rate. Why 1 per cent? There is no objective measure as to why 1 per cent. There is no indexing on that 1 per cent. We know that as an asset class, property has grown at a far greater rate over the last 30 years than any other asset class, so that 1 per cent will become disproportionate over time and it should have been indexed as well.

I say again: this is not really a tax reform; it is a puny effort to increase revenue dressed up as a reform of stamp duty. I think we could have done much, much better. I think a more visionary government in the future will do a whole lot better. I am sure we intend to. I recommend our amendments to the bill, and I will complete my contribution there.

Tom McINTOSH (Eastern Victoria) (18:18): I rise to make a positive contribution to this place, as does indeed this government by bringing in this legislation, the Commercial and Industrial Property Tax Reform Bill 2024. While those opposite might continue with their negativity, as they always do, they support this bill, as do indeed stakeholders all around the state and the country with what we are doing. We expect nothing less from that side. As announced in the 2023–24 budget, we are abolishing stamp duty on commercial and industrial properties, to commence as of 1 July. For these properties stamp duty will be paid one final time on the property. If and when it is transacted, the new annual commercial and industrial property tax will be payable 10 years after the final stamp duty payment, regardless of whether that property has transacted again. So we are increasing flexibility for business in the place where they want to do business. This is a good change for Victorians, this is a good change for Victorian business, yet those opposite want to talk it down. It is an efficiency that we have heard time and time again is needed, and this government has the courage to come in and bring it in. It has brought an idea to this place. While those opposite shake their heads and scowl, we are here delivering it, and that is exactly why I am so proud of it. In the time I have here before dinner – I have got about 8 minutes – I do want to talk about some of the items that have been raised by those opposite throughout a variety of contributions, but I will come back to them as time allows.

To smooth the transition to the new tax system, the government will give purchasers of commercial or industrial property who meet the eligibility as outlined in this information sheet the option of accessing a government-facilitated transitional loan as an alternative to self-financing the up-front stamp duty amount. In this way eligible purchasers who choose the transition loan option transition to an annual repayment for the time of purchase, freeing up capital that businesses can use to invest in expanding and employing more workers.

The commercial and industrial property tax will be set at a flat 1 per cent of the property’s unimproved land value, with no complicated rate schedules or thresholds. The reform will not apply to commercial or industrial property purchased before 1 July 2024 or properties primarily used for residential primary production, community services, sport or heritage and cultural purposes as coded by the Valuer-General Victoria.

Currently, when you buy or acquire a commercial or industrial property in Victoria you pay land transfer, known as stamp duty. Stamp duty adds to the cost of purchasing property, and when applied to commercial and industrial properties it discourages businesses from investing, expanding or relocating operations, impeding growth and productivity. Reforming stamp duty has been recommended by numerous inquiries over recent decades, including the Henry tax review, the Productivity Commission and the Grattan Institute. Replacing stamp duty with the commercial and industrial property tax will encourage businesses to expand or set up in the best location – for example, closer to their customers or where there is a growing workforce – support businesses to invest in buildings and infrastructure and promote more efficient use of commercial and industrial land. The change means a retailer will be more likely to buy the new premises they need for their business to take the next step or a transport company will have more reason to move into that larger warehouse.

Often I talk to businesses, whether it is on the peninsula or across Gippsland, who are experiencing growth and looking for more space, bigger premises or premises that fit the needs of their changing or growing business and who want to make that move. This change is something that they are absolutely looking forward to, as we have heard from a multitude of stakeholders. As we know, across the state, with unemployment low in the regions, we are just seeing businesses take up the opportunity to grow and expand, and this is something that has been very well received in my conversations across the electorate. Removing the up-front costs on commercial and industrial property purchases will accelerate business growth and boost jobs, with a cumulative increase in the size of the Victorian economy as a result of this reform of up to $50 billion in net present value terms. Looking just at the change in tax revenue over the budget forward estimates period, businesses will be paying around $260 million less in stamp duty over the next four years as a result of this reform.

I just want to pick up on some of the comments made by those opposite. There were very, very peculiar comments from Mr Welch just now trying to talk down this legislation and change, which again I note they support. I find it amazing that in all the conversations I have had – and I take it back to, say, when the Liberals were last in power – talking to business groups and talking to industry, it was very clear that between Dolittle and Nap Time nothing happened in this state. We stood still, and the effect of that was we went backwards. Since this side has come to government we have seen unemployment reduce and we have seen new business numbers increase, and those opposite are stuck – absolutely stuck – in their ideological positions, unable to engage with what the community wants and needs. They are stuck and welded to their ideologically extreme think tanks that do not match the wishes, the desires and the needs of the community and do not match the needs of our economy either. This is why we hear them on the other side being negative. My puns are not as good as Mrs Broad’s, but I think ‘the noalition’ captures it pretty well. There is no substance. I have referred to it before – the fact that there are no values for the party to draw on to inform policies. There are no policies, and that is why nothing of substance comes to this place. It is only ever a reactionary negative. It does not matter what is brought, it is negative and very often it is on the ideological extreme. That is why when people in the community look at the Liberal Party – just as they will tonight, the multitude of those watching on – they will just see more negativity. There was an incredible –

Members interjecting.

Tom McINTOSH: The negativity just keeps coming – all these comments, these one-liners, over here before, saying that Labor do not support the regions. You have heard me say this recently: our last four premiers have been from the regions. We are investing in fairer fares, and we are investing in infrastructure and services in regional Victoria. I talked about the Dolittle and Nap Time governments, which did nothing but stand still. At best the Victorian people know that they will get nothing from the Liberals. At worst they will get a repeat of the Kennett government, where the trains were ripped out and the services were pulled out.

Joe McCracken interjected.

Tom McINTOSH: It was slash and burn, and you know it, Mr McCracken. You may laugh. Do you know what we did last week? We celebrated 20 years since the Bairnsdale line reopened. It is fantastic – absolutely fantastic. Our communities absolutely trust and know that we will deliver when it comes to housing, education, health, our road networks and our infrastructure. It is exactly the thing that my colleague Mr Galea talked about in our inquiry: talking to regional communities, being out in regional communities and talking about the $2 billion regional fund, with a billion dollars for regional housing and $150 million for worker accommodation, a brilliant program that acknowledges the business demand for workers. This bill is ensuring that businesses can upsize and upscale and have flexibility in their business arrangements, and we are making sure they have the workers where they want to run their businesses in regional Victoria. There is this sort of negativity that we hear from the Liberal Party, trying to paint this bleak picture. They love a bleak picture. They do not want to see the state prosper. It is absolutely out of context, and Victorians know it. Victorians absolutely know that the best they will get out of the Liberal Party is that nothing will happen and the worst they will get is a repeat of the Kennett years.

Again, I am proud to support this bill. This bill brings absolute common sense, it brings backing from analysts and from business, and it is another great way that the Labor government is getting on and supporting the Victorian economy.

Sitting suspended 6:29 pm until 7:33 pm.

Jaclyn SYMES (Northern Victoria – Attorney-General, Minister for Emergency Services) (19:33): Thank you to those members that have made a contribution on the Commercial and Industrial Property Tax Reform Bill 2024. Look, this is landmark reform, and I understand the bill has received a lot of support from across the chamber, so I do acknowledge the work of the Treasurer’s office in their consultations with members. I think there are a few questions and things like that, so we will move to that soon. Obviously this is all about moving away from stamp duty towards a more efficient tax. At its core it is about encouraging businesses to invest, and we are confident this will create more jobs and stimulate the economy even more.

I do want to make some comments on behalf of the government on an issue that has been raised with the government since the introduction of the bill, and it is the government’s intention to address these matters through amendments in a future bill. The bill, as written, does not provide a duty exemption for certain complex transactions of properties that have entered the reform. These complex transactions include economic entitlements and transfers of dutiable fixtures and goods used or held in connection with land. While the government is committed to fully exempting properties that enter the reform from duty for all transaction types, there are complexities and tax avoidance risks from applying exemptions to these types of complex transactions. The government is flagging its intention of and commitment to working with industry to develop amendments to exempt these transactions, but it needs to ensure that the complexities and risks are carefully managed. We expect to introduce amendments later this year in the spring tax bill. Since these changes are only relevant to properties –

A member: Spring tax bill?

Jaclyn SYMES: No surprises – there is one every year. Since these changes are only relevant to properties –

Members interjecting.

Jaclyn SYMES: Gee, you know you are alive on a Tuesday night, don’t you? Since these changes are only relevant to properties which enter the reform from 1 July and are then subject to a subsequent complex transaction, few, if any, transactions are likely to be affected in the meantime. The Treasurer has indicated he would consider providing ex gratia relief in respect of any duty payable on such transactions, if there are any, in the period between 1 July 2024 and when the proposed changes come into force, as I have alluded to.

Motion agreed to.

Read second time.

Committed.

Committee

The DEPUTY PRESIDENT: I remind members that under section 64 of the Constitution Act 1975 the Council does not have the power to make amendments to parts of this bill. Affected clauses are shaded in red on the running sheet, if anyone has the running sheet. No questions will be put on the affected clauses and any proposed amendments to those clauses must be in the form of a suggestion to the Assembly. Standing order 14.16 sets out the procedure for dealing with suggested amendments.

Clause 1 (19:38)

Evan MULHOLLAND: I might, with indulgence, attempt to ask a lot of my questions on clause 1 so as to not keep the chamber coming back for 4-minute divisions. I am trying to be helpful here. Minister, can you outline how the government arrived at the 1 per cent tax rate? For example, why not 0.5, why not 1.5? How was 1 per cent determined?

Jaclyn SYMES: I thank Mr Mulholland for his question. I do understand some of this was gone through in some detail with the opposition several weeks ago following a briefing from the government and I think some written material has gone backwards and forwards, but it is certainly important to put the question in the house and for me to respond on the record.

Under the Financial Management Act 1994 the government is required to publish revenue forecasts over a four-year period of the budget and forward estimates. Over this period, as you can see in the budget papers, this reform will lead to businesses paying $266 million less, a real tax cut that will support businesses to invest more and, we are confident, to employ more. Longer run revenue forecasts are inherently less certain, and the government does not publish them for that reason. However, our modelling indicates that with a 1 per cent rate for the commercial and industrial property tax the government is likely to return to a revenue-neutral position relevant to its current tax treatment of commercial and industrial properties by around 2050. That is the further detail behind the choice of 1 per cent, Mr Mulholland.

Evan MULHOLLAND: You mentioned the bill briefing. That leads on to my next question. In responses to opposition questions in the bill briefing, Department of Treasury and Finance (DTF) anticipated that this reform would be revenue neutral by 2050 and went on to say that at this point the net present value of the total revenue received under commercial and industrial property tax would be similar to what it would be under the existing arrangement. Do you know what discount rate was used to make this determination?

Jaclyn SYMES: Mr Mulholland, my advice is 7 per cent.

Evan MULHOLLAND: And just what land growth rate was assumed, in the estimate of the revenue neutrality, that is?

Jaclyn SYMES: Just in terms of your questioning, it might be of use to outline just what is meant by ‘revenue neutral’ – that is, that the total revenue received between now and then and any differences in interest payments would be approximately the same when comparing the current tax treatment of affected properties with the new tax treatment that would be brought about by the passing of the Commercial and Industrial Property Tax Reform Bill. As Mr Mulholland has identified, there are a range of figures that have guided the ability for Treasury to predict the impact of the net debt position to be around 2050. I will just seek some advice from the box as to whether there is any other relevant information that I think they would like me to review.

Mr Mulholland, the advice is that there would have been consideration of some historical growth rate. I do not have anything specific available right now, but it is something that we can get back to you on if there is anything. I do not think there is anything further than to say that, but of course we will have a little bit of a look. If there is anything that is particularly relevant, we will bring it to your attention. But I do not think there is at this stage.

Evan MULHOLLAND: I think you answered this question already, but if there was any modelling available to the opposition that you might be able to provide on notice in regard to that, that was my next question. Cool. I will just head down a bit. Under existing arrangements, there is a regional concession of 50 per cent. What was the reason for there being no similar regional–metro split in the land tax rate?

Jaclyn SYMES: Mr Mulholland, I did pick up some conversations throughout debate in relation to the government’s support of regional Victoria. Obviously we would argue, and it is hard to dispute, that no government has done more for regional Victoria and businesses than this government. When those opposite left government some time ago, regional businesses faced payroll tax rates of 4.85 per cent and a payroll tax free threshold of $550,000. We cut the regional payroll tax rate four times, so it is now a quarter of that, and we are increasing the payroll tax threshold to $1 million. It was also our government who introduced the stamp duty concession for regional businesses, because we knew stamp duty would deter business investment and mobility. Under this reform the concession will continue to apply to stamp duty and subsequent transactions will be completely exempt from stamp duty. Regional properties will also generally face a lower tax burden under the new system compared to metro because the commercial and industrial property tax will be levied on unimproved land values, which are typically lower in regional Victoria.

Evan MULHOLLAND: The estimate DTF provided to us indicates that this reform is expected to generate an economic uplift of $50 billion. How was that figure determined?

Jaclyn SYMES: Mr Mulholland, we had some modelling undertaken by Deloitte Access Economics, and they used a computable general equilibrium model, which is the leading type of model for estimating economic impacts such as this reform. Consistent with standard government practice, you would appreciate we are not in a position to release the underlying model behind that result, but it is worth pointing out that while economists are known as a profession to hold a wide variety of views, there is extremely strong consensus on this occasion among economists that swapping stamp duty for land tax will boost growth, and that is likely to be the most consequential growth-boosting reform available to state governments. Hopefully that addresses your question.

Evan MULHOLLAND: Well, yes. My next one was going to be in relation to modelling in regard to that, but I think you have answered that already. I think that might be all the questions I have to ask, but just in regard to stamp duty reform in general, we have previously seen remarks by the Treasurer kind of squashing the idea of reform of the residential market, talking about a $30 billion black hole in regard to residential stamp duty. Does reform of this type leave open the opportunity to look at further residential stamp duty reform in future?

Jaclyn SYMES: Mr Mulholland, there is commentary and there are views in relation to the issues you have raised, but as you would appreciate, this reform only applies to commercial and industrial property consistent with the government’s objective to encourage investment in Victoria, especially by way of businesses, which will support jobs and improve productivity. Of course we are always looking for ways to improve the tax mix and raise the revenue needed for essential services and infrastructure in the fairest and most efficient ways, but for the purposes of today’s committee stage this is confined to commercial and industrial properties.

Clause agreed to; clause 2 agreed to.

Clause 3 (19:48)

The DEPUTY PRESIDENT: Mr Mulholland, I would invite you to move your amendment 1, which tests your amendments 2 to 5.

Evan MULHOLLAND: I move:

1. Clause 3, page 4, after line 13 insert –

“regional Victoria has the same meaning as in section 18(8) of the First Home Owner Grant and Home Buyer Schemes Act 2000;”.

This amendment would give rise to our amendments that were circulated earlier to lower the rate to 0.8 per cent but also still have that 50 per cent concession for regional Victorians, which I think they are entitled to.

Jaclyn SYMES: The government will not be supporting Mr Mulholland’s amendments 1 to 5. They all relate to the rate for commercial and industrial property tax once it kicks in in 10 years time. The reform, as we have previously discussed in some of our exchanges, is designed to be revenue-neutral in the long term. Under the Financial Management Act the government is required to publish revenue forecasts over a four-year period of the budget and the forward estimates, and the reform, as we have outlined, will lead to businesses paying $266 million less. This is fundamentally one of the main reasons we are doing this. This is about a real tax cut that will support businesses to invest more and employ more, and we believe that this is the way to do it. Longer run revenue forecasts are inherently less certain, and what we have suggested is that the 1 per cent rate for commercial and industrial property tax is likely to return to the revenue-neutral position by around 2050, and again we reiterate our view that the 1 per cent is the right balance. With the amendment from Mr Mulholland and for what it tests in relation to regional businesses, I can only go back to my answer to the question in clause 1 in relation to our rationale for this and reiterate our ongoing support for regional Victorian businesses. We believe that this is the way forward in striking the right balance in terms of tax paid by businesses over the medium to long term for all of those in the state.

Council divided on amendment:

Ayes (16): Melina Bath, Jeff Bourman, Gaelle Broad, Georgie Crozier, David Davis, Moira Deeming, Renee Heath, David Limbrick, Wendy Lovell, Trung Luu, Bev McArthur, Joe McCracken, Nick McGowan, Evan Mulholland, Rikkie-Lee Tyrrell, Richard Welch

Noes (21): Ryan Batchelor, John Berger, Lizzie Blandthorn, Katherine Copsey, Enver Erdogan, Jacinta Ermacora, David Ettershank, Michael Galea, Sarah Mansfield, Tom McIntosh, Rachel Payne, Aiv Puglielli, Georgie Purcell, Samantha Ratnam, Harriet Shing, Ingrid Stitt, Jaclyn Symes, Lee Tarlamis, Sonja Terpstra, Gayle Tierney, Sheena Watt

Amendment negatived.

Clause agreed to; clauses 4 to 16 agreed to.

Clause 17 – no question put pursuant to standing order 14.16(2).

Clauses 18 to 56 agreed to.

Clause 57 (19:58)

Evan MULHOLLAND: I move:

6. Clause 57, page 45, after line 13 insert –

“(7) The Treasurer must –

(a) determine the risk margin for the transition loan program; and

(b) update the risk margin at least once each financial year; and

(c) cause details of the rationale for the risk margin to be published in the Government Gazette –

(i) with the notice published under subsection (3)(a) or (b); and

(ii) as soon as practicable after each update of the risk margin.”

It is in regard to the risk margins that are set. As I mentioned earlier on, the loan attracts an interest rate which is comprised of one interest rate linked to the Treasury Corporation of Victoria. The 10-year bond rate we have no concerns with. On the risk component, though, we think it is prudent for a risk component to be charged but are concerned by the lack of transparency around how the Treasurer of the day could act, and so this is a simple transparency measure to incorporate an annual statement on how the risk component of the rate is determined.

Jaclyn SYMES: The government will not be supporting this amendment. It is not standard practice consistent with other risk margins applied to the government and with the behaviour of commercial lenders offering similar loans. Contrary to some of the commentary that we are hearing, there is no risk here of the government changing the loan to the detriment of existing borrowers. Each potential borrower will see the interest rates prior to deciding whether to take out a loan, and if they choose to, their interest rate will be fixed for the life of the loan. Government has committed to the transition loan being provided on a commercial basis, and the budget treatment of the reform depends on that, and it is subject to audit by the Auditor-General. It is also worth noting that the Treasury Corporation of Victoria does not release this information for any risk margins on any other products.

Council divided on amendment:

Ayes (16): Melina Bath, Jeff Bourman, Gaelle Broad, Georgie Crozier, David Davis, Moira Deeming, Renee Heath, David Limbrick, Wendy Lovell, Trung Luu, Bev McArthur, Joe McCracken, Nick McGowan, Evan Mulholland, Rikkie-Lee Tyrrell, Richard Welch

Noes (21): Ryan Batchelor, John Berger, Lizzie Blandthorn, Katherine Copsey, Enver Erdogan, Jacinta Ermacora, David Ettershank, Michael Galea, Sarah Mansfield, Tom McIntosh, Rachel Payne, Aiv Puglielli, Georgie Purcell, Samantha Ratnam, Harriet Shing, Ingrid Stitt, Jaclyn Symes, Lee Tarlamis, Sonja Terpstra, Gayle Tierney, Sheena Watt

Amendment negatived.

Clause agreed to; clauses 58 to 67 agreed to.

Reported to house without amendment.

Jaclyn SYMES (Northern Victoria – Attorney-General, Minister for Emergency Services) (20:04): I move:

That the report be now adopted.

Motion agreed to.

Report adopted.

Third reading

Jaclyn SYMES (Northern Victoria – Attorney-General, Minister for Emergency Services) (20:04): I move:

That the bill be now read a third time.

The PRESIDENT: I am of the opinion that this bill requires to be passed by an absolute majority. I ask the Clerk to ring the bells.

Bells rung.

Members having assembled in chamber:

The PRESIDENT: I ask members that are voting for the third reading now stand in their places.

Required number of members having risen:

Motion agreed to by absolute majority.

Read third time.

The PRESIDENT: Pursuant to standing order 14.28, the bill will be returned to the Assembly with a message informing them that the Council have agreed to the bill without amendment.