Thursday, 28 October 2021

 Mr T SMITH (Kew) (15:33): Given the somewhat chaotic scenes that we have just witnessed, I might, with the house’s indulgence, just take a brief moment to get my notes in order. But I advise the house that the opposition will be—

Members interjecting.

The SPEAKER: Order! I might just ask the member for Kew to pause for a moment. If I could ask members who are engaging in conversation to maybe leave the chamber. The member for Kew has the call on the Windfall Gains Tax and State Taxation and Other Acts Further Amendment Bill 2021.

Mr T SMITH: Thank you, Speaker, and thank you for giving me those brief moments to get myself organised. The Liberal-Nationals opposition will be opposing the Windfall Gains Tax and State Taxation and Other Acts Further Amendment Bill 2021. I also advise the house that I move:

That all the words after ‘That’ be omitted and replaced with the words ‘this bill be withdrawn and redrafted to:

(1)   take into account further and proper consultation with the property and development sector and young Victorian families about the windfall gains tax in relation to the potential for higher housing costs; and

(2)   retain the remaining provisions of the bill’.

This is the wrong tax at the wrong time. I refer to a letter I have received from the Property Council of Australia, the Urban Development Institute of Australia (UDIA), the Housing Industry Association (HIA) and the Master Builders Association of Victoria, and I quote:

Since the WGT announcement on 15 May, Victoria has endured two snap lockdowns and is now in an extended lockdown due to the impact of the Delta variant of COVID-19 in the community.

This letter is dated 18 October.

This has placed further pressures on all parts of the economy, even with the combined efforts of governments to provide financial assistance during this period.

We wrote in May that the WGT, along with the stamp duty and land tax increases, were taxes on Victoria’s economic recovery after the most significant economic and social crisis of our generation.

I repeat: the most significant economic and social crisis of our generation.

This crisis has only deepened in the last four months and requires a concerted and coordinated recovery effort, co-led by government and industry, to ensure we emerge on the other side.

Now, more than ever, is not the time—

I repeat: is not the time—

to introduce an unprecedented new tax that delivers so much uncertainty and is set to increase costs for everyday Victorians.

We look forward to meeting … to discuss these important issues further.

Now, Labor’s record in government in increasing or introducing new taxes is profoundly awful, to say the least. The Property Council of Australia engaged Pitcher Partners, and Pitcher Partners has provided advice to the property council that:

Since coming to government in 2014 the Andrews Labor government has introduced 24 adverse changes to property taxes. These include eight new property taxes outright, seven increases in the rate of existing and new property taxes, four removals of exemption categories for property taxes without a replacement, exemption or concession, and two significant changes that expanded the scope of the land tax regime. In addition, in the 2020–21 state budget the Victorian government raised the rate of land tax, introduced a new premium rate of stamp duty and is now proposing to introduce this windfall gains tax.

This all has a profound impact on our economy. Modelling by Urbis for the property council highlights that the three largest projects that are currently underway in Victoria are set to be impacted by the windfall gains tax, that there will be a significant impact on Victoria in terms of delayed economic activity. It said:

If the proposed development proceed without the application of the WGT they will have significant positive impacts on both the employment and value-added to the Victorian economy. If they are subject to the WGT in all three cases development becomes unviable and is unlikely to proceed. With a total combined construction cost of $6.2 billion it is estimated that the construction of the three projects would generate more than to 3200 full-time equivalent jobs, direct and indirect jobs, on average during the construction period. These job estimates are equivalent to approximately $800 million in gross value-added to the state economy per year over the construction time frame.

This is significant. This is hugely significant to our economy, this tax. It will have a hugely detrimental impact on our economy, as we are trying to all rebuild from 18 months of trials and torment through the world’s longest lockdown.

I return to my original document, which is a joint letter from those who understand the property industry and what it does for our state in terms of economic development, jobs and obviously providing a roof over each and every family’s head—and that is, it is the wrong tax at exactly the wrong time. As I said earlier, Labor’s record in government of new and expanded taxes is horrendous.

For the record, I am going to read them into Hansard: a new stamp duty on property transfers between spouses; an increased stamp duty on new cars; a new stamp duty on off-the-plan purchases; a new so-called ‘vacant’ home tax; a widening of vacant residential land tax to uninhabitable properties; a retrospective increased insurance duty for overseas-based insurers; a new annual property valuation to increase land tax; a cladding rectification tax; an environment mitigation levy; an increased luxury car tax; an increased land tax for homes with blocks on a separate title; an increased fire services property levy, twice; a new point-of-consumption gambling tax; a tripling of brown coal royalties; goldmining royalties; a new tax on Uber and taxi fares; a new corporate restructure duty; an increased foreign stamp duty, twice; an increased foreign stamp duty again; an increased overseas landowners surcharge, three times; a new city access tax for the West Gate Tunnel; a new on-dock rail charge on imported shipping containers; increases to the municipal and industrial landfill levy—a bin tax; a road occupation charge on construction companies; a numberplate tax; an electric vehicle tax; a new affordable housing tax; an increased land tax on taxable landholdings above $1.8 million; an increased stamp duty on property transactions; an expanded point-of-consumption gambling tax to keno; a 10 per cent increase to the Victorian government penalty units; an expanded land tax on clubs—and I would like to declare an interest, I am a member of one of those clubs that this proposed new tax would apply to; a mental health payroll tax surcharge; an increased wagering and betting tax; and an increased fire services levy in 2021 and 2022.

Now, that took quite some time, and it took quite some time because there are 39 of them—39 new and expanded taxes under the Andrews Labor government, past or proposed, through this Parliament. This is, again, not the time to be foisting a new tax on what is a crucial part of Victoria’s economy, and that is the property sector.

Now, the Housing Industry Association have some very important questions that they have not had answered by this government:

What is Government’s justification for introducing this tax now when the Victorian land supply market faces uncertainty from COVID-19 economic impacts, negative population growth and loss of immigration?

I would have thought that was a very important question. The sensible economic rationalists, if any are left in the Labor right, have lost their voice, to be usurped by this harsh, left-wing Labor government that has caused such a loss of our freedoms and indeed our democracy and is now trying to tax us into prosperity. You cannot tax a state into prosperity. The second point that the HIA raised is this:

What mechanisms exist to ensure the tax will be allocated to infrastructure in the Council, region or growth area from which the tax is generated?

What benefit does the Council administering the planning scheme amendment gain from the tax?

As the tax seems to disproportionately impact regional developments will the government ensure that revenue gained from the tax will be spent in regional Victoria and not Melbourne?

Now, I note my friend the member for Ripon has entered the chamber, and I have no doubt that she will be making quite significant commentary about these matters later on in this debate. The third point that the HIA raised is an important one:

What is the justification for using the ‘capital improved’ values over ‘site’ values?

How does Government justify taxing independent increases in property value from capital improvements as part of a rezoning tax model?

A very important question—I suspect the government has absolutely no idea what the answer is. The fourth point that the HIA raised is on the mechanics of the tax:

What guarantee does Government give that financial institutions will lend money to developers for a project to develop land that will have up to a 30-year tax liability?

See, this is what Labor do not understand. This is above all else a tax on certainty and a tax on confidence. We have to give this sector certainty and confidence to be able to develop and to grow, and quite frankly these sorts of taxes, like the 38 other taxes that have been introduced or increased during the period of this government, simply add to the obvious fact that if you have capital at the moment and you have got six Australian jurisdictions to choose from, why would you invest here with these people running it? Why would you? All they will do is lock you up, lock you down or tax you into oblivion.

This is the sort of sovereign risk that capital is concerned about in Victoria. That is why we are seeing population flight from Victoria, and I suspect you will also see capital flight from Victoria. This is pretty simple. We are dealing with a once-in-100-year event, which is being locked down for 263 days; 200 000 jobs lost; a mental health crisis; 1065 people losing their lives from COVID-19, the highest in the nation; 85 000 cases of COVID-19, the highest in the nation; but with the greatest restrictions and the harshest restrictions of anywhere in the nation. If you start whacking new taxes—a great big new tax on virtually every big development—well, what do you think that is going to do to economic confidence, confidence from capital to invest and for the population who are interested in investing in these matters to remain here? We need this investment. We need this confidence. We also need the population to stay here, and with the way this government is going, with 43 000 people having just left the state, it does not bode well for confidence.

The charge imposed by clause 42 of the bill will give the government collection of WGT priority over other encumbrances over affected land. Has the government considered the impact of this charge over land on financiers’ willingness to finance land development? Despite repeated requests, the government has not released the forecast revenue modelling for this tax. It has not released it. Industry believes the forecast is substantially lower than what this tax would yield. What is government’s reason for not releasing the revenue modelling?

Now, this sounds familiar. This government is being secretive again. Who would have thought it? Who would have thought that this government is not being entirely honest with the people of Victoria? There were examples of that some time ago. I asked a very simple question in question time in regard to how primary close contacts of those infected with COVID-19 will be treated when we move to the 80 per cent and then phase D mark of the national plan. All we got from the Minister for Health during question time was obfuscation and misleading statements that it was all far too complicated for him to answer the question. Well, business needs certainty. That is the whole point. Business must have certainty to be able to grow, for people to be able to invest, and taxes like this and non-answers like we got from the health minister constantly add to the uncertainty that business and our economy face here in Victoria. It is not the way to inspire confidence so that we can rebuild ourselves next year.

The government has been progressing the introduction of the regional infrastructure contribution plan. What is the government’s tax agenda for regional Victorian rezoning amendments where that land will be developed? I think these are very reasonable questions from a very, very well respected industry body, and quite frankly the fact that they have written to us asking us to put these questions to the government because they have not had an answer shows you the sort of haphazard governing that is going on in this state and shows you that the government has not been fair dinkum with industry and has not been fair dinkum with those who are creating jobs and who are our way back from what has gone on in this state, which has been horrendous for both businesses and families.

How does the government justify taxing uplift values of 50 per cent for amendments where administrative, remediation, development et cetera costs are entirely borne by a proponent? This is really serious. This is really serious for confidence and it is really serious for the way these businesses operate, and this government treats them with contempt, does not listen to them and does not answer their very legitimate concerns.

Now, this government has never seen a tax it does not like. It has never seen a freedom it does not want to erode.

Members interjecting.

Mr T SMITH: I hear the muttering and the grumbling. Well, stop taking our freedoms. Stop trying to lock us up. You have locked us up for 263 days. 263 days you have locked us up for, and it is all fine now—until you slip your pandemic legislation in and lock us up again.

Mr Battin interjected.

Mr T SMITH: And they will tax you. There will be a lockdown tax next, each and every day.

The UDIA equally has some significant concerns about this great big new tax on every new development. The UDIA modelling shows that on the basis of just seven case studies each project will be rendered unviable and will not proceed. This will reduce housing supply by 6696 dwellings, including over 300 affordable, social or disabled-access dwellings; cost over 20 000 direct jobs and nearly 100 000 indirect jobs; and reduce Victoria’s economic output by nearly $7.5 billion. Importantly, we estimate that this will cost the state’s budget $170 million in forgone stamp duty receipts, with a total economic loss to the state of $7.7 billion.

So whilst they are sticking further legislation into the Parliament that gives people genuine concern about the way we will live our lives in 2022, they are taxing one of the most important parts of our economy. This is nonsensical. This is reckless. It is wrong. It is opposed by the Liberal and National parties. It will do untold harm to house prices—untold harm. By restricting the supply of housing, as it is predicted to do, this tax will do untold harm to the housing market and indeed housing prices, which we all want to see as low as possible, particularly for young families.

I ask the government to reconsider this plan, this ill-conceived and poorly thought through great big new tax. I ask them to reconsider because, as I stated at the outset, it is the wrong tax at the wrong time. We oppose this. We oppose it because we are the Liberal and National parties—we do not like new taxes. In fact we want to reduce tax. There has never been a greater divergence between the two major parties in this place. One party wants to lock people up and give enormous powers to the state and enormous powers to the Premier to declare a pandemic and the health minister to impart orders on people that would see them incarcerated without trial for months on end. They also want to tax some of the most important aspects of our economy. We do not support that. We want to see a smaller state, lower taxes and greater freedom, because—guess what?—the Liberal and National parties are the only parties here that actually care about an individual, their rights and their freedoms and indeed about lowering their tax burden to the state government and keeping their home as well valued as possible but more importantly their potential new home as cheap as possible.

These are very important matters, but all we get from Labor members is mumbling derision. There has never been a new tax they have not liked, and there has never been a freedom they have not wanted to erode. On that note, I thank the house, and I shall take my leave.

 Mr STAIKOS (Bentleigh) (15:53): I rise to contribute to the debate on the Windfall Gains Tax and State Taxation and Other Acts Further Amendment Bill 2021. I am very, very disappointed, at the outset, to hear that the opposition will not be supporting this bill, but nonetheless we will struggle on.

This bill does a number of things, but principally it establishes the windfall gains tax, and I will focus my remarks mainly on the WGT. It was announced as part of the 2021–22 budget. Its purpose is to share the windfalls from rezonings with the Victorian community but also to support the integrity of our planning system. It will be a tax on rezoning decisions that create a land value uplift of more than $100 000. For a rezoning with a value uplift of between $100 000 and $500 000, the tax will apply at a marginal rate of 62.5 per cent on the uplift above $100 000. For those rezonings with an uplift of above $500 000 the tax rate will be 50 per cent of the total uplift.

Following this announcement the Treasurer asked me to consult with a number of key stakeholders. The member for Kew has moved a reasoned amendment to defer this bill until there is proper consultation. There was proper consultation. We met with a number of key stakeholders from the industry. We met with the Victorian Farmers Federation (VFF), who had some very specific concerns, and I think we have addressed many of them. We met with the property council, we met with the Urban Development Institute of Australia and we met with the Housing Industry Association, Master Builders Victoria and Urbis. We also heard some strong feedback from the Grattan Institute and Prosper Australia, and I also had a number of meetings with the university sector, who have some very specific concerns about rezonings because rezonings have become a common practice when developing and redeveloping campus sites, and perhaps I will come to that in a moment.

But firstly I thank each and every one of the people from the industry and other stakeholders with whom I met for their feedback, for sharing their concerns but also their suggestions on a good way to move forward. While it is the case for all of the industry stakeholders I met with that they opposed this tax, we certainly made sure to take into consideration a number of their concerns, and we came up with a number of changes as we went through developing the broad policy parameters of the WGT. Firstly, we kept hearing that if this tax were to go ahead, the sector needed more time, so to give the sector more time, and recognising current economic conditions, we determined that the commencement date of this new tax would be pushed back to 1 July 2023; it was to come in on 1 July 2022.

Similarly, we have put in place transitional arrangements to exempt certain land associated with proponent-led rezonings which were sufficiently in train at the date that the policy was announced. More specifically this includes land with a planning scheme amendment that had obtained a tracking number in the amendment tracking system administered by the Department of Environment, Land, Water and Planning by 15 May 2021, which was the date that the policy was announced. Again more specifically I am referring to, as we colloquially know in local government planning circles, the C number. So those rezonings that by 15 May 2021 had a C number will be out of this.

In addition we have ensured that the family home as well as holiday homes and residential investment properties will not be impacted by this tax by putting in place an exemption for residential land which includes a dwelling fit for occupancy at the time of rezoning, with the exemption applying for up to 2 hectares of residential landholdings and regardless of whether the dwelling is the landowner’s principal place of residence. This was a change that I was very, very keen to see included in this bill, because nobody wanted a situation where this covered people’s homes. That is not the intent of the windfall gains tax. This is about those significant rezonings where there is a lot of money to be made by the developers, by the landowners, but there is also a lot of infrastructure to be built, and that needs to be shared with the community.

In addition and through regulations we will also be providing an exception for land that is rezoned to any rural zone other than the rural living zone, which is aimed at exempting farmers that want to continue to farm their land when it is rezoned from one rural zone to another; that is something that the VFF requested. Charities will also be eligible for an exemption. They will not pay any windfall tax liability on their landholdings so long as the land continues to be used for charitable purposes for a 15-year period after the rezoning event, recognising the important work that charities do across Victoria. Of course our universities are themselves charities, and they will be covered by that specific provision of the bill. In addition to that exemption applying to universities, we are continuing to engage with the university sector about options to provide tax exemptions or other support to projects that do not qualify for the legislated exemption but nonetheless demonstrate benefits to the community. That is ongoing, and we hope to have more to say about that soon.

To ensure that the windfall gains tax liabilities align with cash flow we have made provisions so that the payment of tax can be deferred until the next dutiable transaction or until 30 years elapses, whichever occurs first. Interest will apply to any deferred liability at the 10-year Treasury Corporation of Victoria bond rate, which is at 31 August 2021, 1.52 per cent. That is really just to cover the government’s costs of deferring the liability. To ensure that the tax is applied fairly we have also changed how the uplift is measured at the point of the rezoning event. It will now be measured on the uplift in the capital improved value rather than the site value.

The final point I wish to raise specifically on the WGT is the matter around deductions, because this is something that came up time and time again at these meetings. This legislation gives the Treasurer the power to enact regulations to allow certain deductions, and a decision on whether and how this power will be used will be determined based on further analysis and consultation with industry. A final decision will be made prior to the commencement of the WGT on 1 July 2023.

I had a lot of meetings about this new tax, and it is fair to say that I heard a lot of catastrophising, and that really is because nobody wants to pay more tax. But I think there are a couple of things that we need to remember throughout this debate, and one of those things is that these projects accumulate a lot of their value in the years leading up to a rezoning. It takes years and years and years to rezone land, and that land over those years is flagged for a potential use. It will not apply to that land value increase. It will only apply to that one event in time, the gazettal of that rezoning. It will apply by deducting the value 1 from value 2. That is how it will apply. It will just be that rezoning event.

The other thing I wanted to highlight today in the short time I have got remaining to me is that rezonings of land—and we must always remember this—are ultimately decisions of government. You cannot as of right sit on vast industrial or greenfield land with the expectation that it will definitely be rezoned one day and that will enhance your profits. That would be somewhat presumptuous. These are decisions taken by local and state governments, taking into consideration the greater good of the community, not the profits of a developer or the profits of a landowner. Therefore it is reasonable that any windfall gains from a government decision to rezone land are shared with the broader community.

I think there have been certain instances throughout our history where those profits have not been shared, and the most egregious example of that is Fishermans Bend—and we all know what the Leader of the Opposition was up to back then. The community did not get anything out of that; only some very wealthy people got wealthier. That will never happen under this government. I certainly support this bill wholeheartedly. I support the other measures in the bill that I have not had time to talk about, and I wish it a speedy passage.

 Ms STALEY (Ripon) (16:03): I rise to speak on the Windfall Gains Tax and State Taxation and Other Acts Further Amendment Bill 2021. As the member for Kew as the lead speaker for the Liberal-Nationals said, we do not support this tax and therefore we do not support this bill. This is, I believe, the 40th new or expanded tax that this government has brought in, and that is despite, of course, the Premier, then the Leader of the Opposition, promising that there would be no new taxes, and then further the Treasurer prior to the last election saying that, again, that were no new taxes and it was all there in black and white. Well, apparently, their words are worthless, because they have in fact introduced 40 new or expanded taxes, this being the latest.

Now, I particularly speak on this tax because the major impact of this tax will be on regional areas. The government appears to not understand how rezoning in cities like Ballarat occurs. What happens is that the city sets out a plan of where it wants its urban growth to happen—people know where that is—and then as the need for new housing lots to be opened up occurs, they rezone the land. They do not rezone it earlier, because that would mean that the people sitting on the land could be sitting for a decade or more, paying very high rates on land that is zoned residential even though there is no developer there to redevelop it—they are not up to where that one is going to be developed. What the cities do is they do the rezoning on a rolling basis.

Now, there are many people around Ballarat who are sitting on land, and have sat there for decades, for whom it is the family home, on land maybe. I have got an example I will provide in a minute. These are people who have farmed or been on large lifestyle blocks, and this has been their life, and then they have thought about—in the back—this being their superannuation. And now they are being confronted with the fact that this government wants to tax them at a very high rate—I mean, we are talking about for the lower gains, those under $500 000, a 62.5 per cent tax rate. That is an extraordinary rate to apply and bizarrely makes the 50 per cent take for profits over $500 000 look reasonable by comparison, but of course it is not reasonable.

We do have a huge problem here. What this tax is doing is discouraging, really fundamentally discouraging, people from having their land rezoned for housing and selling it to developers. There will be shortages of land around Ballarat, Bendigo and Geelong within five years. We are finally at a point where, particularly in the case, could I say, of Ballarat—the one that is closest to my heart and takes in part of my seat—we have really substantial growth in the west of Ballarat and in the north, and this zoning is remaking Ballarat as a new city, with all of these new households. It is great news. But what we have found is that we are going to run out of land, and that will mean that we are likely to see—in fact many have gone and calculated this—that this tax will add up to $25 000 per housing lot in the regions. Far from being any sort of Robin Hood tax that is taking from the rich and giving to the poor, the people who are actually going to pay this tax are going to be the families, the first home buyers, on the outskirts of Ballarat, whether they are in Miners Rest, Lucas, Cardigan or any of the other suburbs that are growing around Ballarat. Now, that is an outrageous thing to do to people trying to get into the first home buyer market.

It is not just one group that does not like this. I know the previous government speaker said that he had done all this consultation. Well, they must have been a great set of meetings is all I can say, because many of the people he mentioned have recently reiterated their opposition to this tax due to it being the wrong tax at the wrong time. The Property Council of Australia, the Real Estate Institute of Victoria, the Housing Industry Association, the Urban Development Institute of Australia—they all warn that this is not the right tax ever and certainly not now when we are coming out of a pandemic.

I want to mention a family I met with in Miners Rest last week. They own 22.5 acres on the edge of Miners Rest. They have lived there for decades, and their plan has been for a long time—they have seen Miners Rest growing towards them—that they would sell, eventually, to a developer and that would fund their retirement. Now, 22.5 acres is quite a lot of houses, but it is not the huge millions of dollars that people are talking about. This is quite modest in the scheme of things. And for these people, this tax takes away their retirement. On the one hand we have got a tax that harms home ownership in the regions, but it is also harming the retirement incomes of some relatively modest landholders.

This is the final point I would make on this tax that makes it so wrong. In Melbourne the growth areas have what is known as the GAIC, the growth areas infrastructure contribution, which is much lower than this is proposed to be, and it funds infrastructure in those growing areas. Well, this tax, which is largely going to be raised on country Victorians and regional city Victorians, goes into consolidated revenue. The people of Ballarat do not get to see the benefit of this tax. It is all going into Melbourne’s coffers to prop up the huge cost overruns on the giant projects. I mean, we had another one today with another cost overrun with the North East Link. I think it is another $2 billion added to the price. Country Victorians lose three ways: their landholders lose, their first home buyers lose and their amenity is lost because the money goes into the centre. This is a bad tax, and it must be opposed.

I will finish my remarks with some brief remarks on another aspect of this bill. Now, this bill, apart from the windfall gains tax, makes a number of other taxation amendments. One of the things that it does is it amends the land tax to remove the land tax exemption for private gender-exclusive and gender-restrictive clubs. Now, I declare an interest here. I am a member of a gender-exclusive club, the Lyceum Club. Now, I understand that the government thinks that by doing this it is getting at all the rich old white dudes that are in the Melbourne Club, the Australian Club and the Athenaeum Club. Well, the point is they are rich. When you look at the clubs that are actually going to be hurt by this, it is largely the Lyceum Club and the Alexandra Club, the women’s clubs, which have lower asset bases and lower capacity to pay land tax, because—surprise, surprise—women in this society earn less then men and they do not have the same asset base behind them. So whoever cooked up this idea that it was going to be so great to have a great whack against the patriarchy, particularly the patriarchy in those clubs, got it entirely wrong. The group that is actually going to be harmed the most by this is the women’s clubs.

Now, I will note on this that freedom of association is a fundamental principle. People should be able to choose who they associate with. I choose to be in a female-only club. That is the club I want to be in. I could join one that is mixed sex, but I choose not to. I should have that right to freely associate with other women because I want to—for no other reason than that. But again, this government with its flawed ideas around social engineering has not thought about who will actually be harmed by this change to the taxation laws. It will not be the men in the Melbourne Club or the men in the Australian Club. They are some of the richest men in Australia. No, it will be the women in the Lyceum Club and in the Alexandra Club. Once again their blind ideology has backfired, and again that should be opposed.

 Ms BLANDTHORN (Pascoe Vale) (16:13): I appreciate the opportunity to rise and speak on the Windfall Gains Tax and State Taxation and Other Acts Further Amendment Bill 2021. This is a bill which will play an important part in ensuring that our taxation system is fair, that it is competitive and that it delivers for the needs of our state and our state’s future. Our taxation system must deliver for all Victorians. It must be modern and it must be responsive to change. The bill takes action in relation to the windfall gains of high-end property developers, legislating to ensure their windfalls are shared with local communities.

As we announced as part of our 2021–22 budget, we are introducing a windfall gains tax (WGT) on rezoning decisions that create an uplift in land value of more than $100 000. Our last two budgets have been delivered in some of the toughest times that Victoria, and indeed the whole of Australia and the world, may have ever faced. Our budgets have played and continue to play an important role in supporting our community through this one-in-100-year pandemic that has impacted on every single Victorian and imposed significant uncertainty and challenges on the livelihoods of so many people.

Our work to ensure the health and safety of our state alongside the continued challenges from the incursion of the coronavirus, particularly the delta variant, has been unwavering. We have had to respond to this crisis at the time, while making sure our economy can bounce back in our vaccinated society. We have done so while continuing to introduce a range of reforms and investments which will bolster our commitment to the health and wellbeing of all Victorians as we progress with rebuilding our economy and with rebuilding our future. The budget revenue initiatives and tax relief measures included in this bill are a testament to this, along with the amendments made to the taxation and other acts.

The arrival of safe, effective vaccines onto our shores has completely changed the way we manage this global pandemic, paving the way for the significant rebuilding and reinvigorating of our economy and industry into the near and also the distant future. Establishing fair and equitable streams of revenue is an important part of continuing to deliver our commitments for all Victorians, and this bill will play an important part in ensuring Victoria’s taxation system is progressive and that it sets a framework in which everyone makes their fair contribution to support our economic recovery and in which everyone makes their fair contribution to support our stability.

The bill is a complex one and it is a detailed one that addresses a number of areas, as those who have already spoken before me have mentioned. I will endeavour to talk through a few of those, but I really want to, in the time I have available, come to why this bill is so important.

Firstly, in relation to the windfall gains tax element of this bill we are responding to the reality that land rezoning decisions which expand permitted uses and economic potential can mean immediate land value increases that can be very significant for landowners, accruing solely to them in addition to the regular income or profit that is earned from such land. Through this bill we implement a new principal act to introduce a windfall gains tax on the uplift in land value resulting from an amendment to a planning scheme that changes the zoning of land, and this will apply from 1 July 2023.

The commissioner of state revenue will administer the tax under taxation law and under the Taxation Administration Act 1997. This act will, through enabling this tax on windfall gains, allow for a share of these private economic benefits that result from rezoning to be captured as a stream of revenue, efficiently and equitably, for the benefit of the whole community. And this revenue can positively impact on the delivery of investment in government services and infrastructure. Indeed it can help us put Victorians first.

The tax will be paid by landowners and will be applicable to most rezonings across the state that have a value uplift in excess of $100 000. In terms of the calculation this will be on the taxable value uplift in land from rezoning: the difference in the capital improved value of the land before and after the rezoning takes effect. And in determining pre- and post-rezoning values, the value pre rezoning will be drawn from the most recent valuation in force for the land under the Valuation of Land Act 1960. The post-rezoning value will be determined through a supplementary valuation that is certified by the valuer-general of Victoria.

In situations where the taxable value uplift is more than $100 000 but less than $500 000, the payable tax will be at 62.5 per cent of the uplift in excess of the $100 000. In situations where the uplift is $500 000 or more the payable amount is a flat rate of 50 per cent of the taxable value uplift. There will also be grouping and aggregation provisions that will apply, and this will mean that properties that are owned by the same owner or group of owners and rezoned under the same planning scheme amendment will effectively receive the benefit of one threshold. Furthermore, these provisions will operate for related corporations and related trusts on similar terms to the grouping for land tax purposes. Owners will be able to object to the valuations that are used to calculate the tax, and these objections will be determined by the valuer-general on the State Revenue Office’s referral.

There will be exclusions to the tax, and this will include rezoning to and/or from the urban growth zone, which relates to the growth areas infrastructure contribution, the GAIC. The GAIC assists with the provision of infrastructure to suburbs in Melbourne’s fridge suburbs, serving a one-off contribution in instances such as subdividing and applying for a building permit on large blocks of lands, thus serving a purpose similar to the windfall gains tax. The exclusion will also apply to rezonings from a public land zone in addition to movements between schedules in the same zone.

Furthermore, through this bill the Treasurer will have the power to declare by notice published in the Government Gazette that certain rezonings to specific zones will be included in the excluded rezoning, and there will be exclusions and waivers that apply for some land types. This is relevant for the residential land, which some have referred to earlier, with a residential dwelling and including primary production land, that will receive a WGT exemption for up to 2 hectares of residential landholdings that are rezoned by the same planning scheme amendment. In circumstances where such residential landholdings are greater than 2 hectares, the value uplift will be proportionately reduced. Important also is that charitable institutions will be eligible for a waiver in the circumstance where the relevant land remains owned and occupied by a charity exclusively for charitable purposes for 15 years after the rezoning.

Exemption to the windfall gains tax will also apply in relation to rezonings to correct obvious or technical errors in the Victorian planning provisions or planning scheme, and here there is provision for deferred or previously paid tax to be reassessed or refunded as appropriate. This bill also allows time to adjust for landowners and for purchasers, and this will be facilitated by certain circumstances not being subject to the windfall gains tax. This applies to rezonings that occur on land subject to a contract for consideration or option arrangement entered into by 15 May 2021 where the contract or arrangement has not yet settled at the time of rezoning, excluding development arrangements.

Proponent-led rezonings that are well progressed and that have incurred significant costs prior to the announcement of the WGT on 15 May 2021 will not be subject to the tax. Moreover, in recognition of the reality that some owners may not have the capacity to pay the entirety of the tax assessment at rezoning, all owners will have the ability to defer the payment with interest for up to 30 years or until the sale or transfer of the property, whichever it is that might occur first. In these instances the interest rate applicable will be the 10-year Victorian government bond.

This bill makes important amendments that will make a positive impact on the broader delivery of our Big Housing Build package with respect to build-to-rent developments. This is a particularly important aspect of this bill to incentivise build-to-rent developments. In our 2021 Victorian budget we announced that there would be a 50 per cent land tax discount from 1 January for eligible investments, working to encourage more investment in what is an expanding sector. This means that eligible build-to-rent developments that are completed and operational between 1 January 2021 and 31 December 2031 will receive both a 50 per cent land tax discount and the full exemption from the absentee owner surcharge. To enable this the Land Tax Act 2005 will be amended to expand this initiative, enabling the land tax concessions and AOS concession to be provided for these settings. In addition, following consultation with industry and relevant stakeholders, we are providing greater certainty for eligible developments that are due to be completed before the 1 January 2022 commencement date, and this will mean that shovel-ready projects can confidently begin as soon as possible.

In the short time that I have remaining I just want to draw to the attention of the house the importance of this bill in relation to our overall agenda. The Andrews Labor government has demonstrated over nearly two terms in government now an agenda of strong financial management pre and during this pandemic, ensuring support is there for Victorians who need it most and making sure a fair contribution is made along the way.

The measures that are featured within this important bill—and there are many, as many before me have already drawn to the attention of the house—come before us on the back of this record of real action and providing real relief for Victorians. This commitment to fairness and support has been evidenced by our tax cuts in our first term for almost 40 000 businesses, increasing the payroll tax-free threshold from $550 000 to $650 000. This commitment was further brought forward by 12 months in our May budget, increasing the payroll tax threshold to $700 000. We also cut payroll tax for regional Victoria and have now cut regional payroll tax to just 25 per cent of the metropolitan rate, and this has occurred a year earlier than what was planned. I commend the bill to the house.

 Mr R SMITH (Warrandyte) (16:23): I rise to speak on the Windfall Gains Tax and State Taxation and Other Acts Further Amendment Bill 2021. In starting off I just want to reiterate some of the proceedings of this house over the course of the day and in particular echo the words of the member for Gembrook, who said this is Labor in a typical display to curtail debate on a bill that takes away Victoria’s democratic rights in order to start a debate that introduces a new tax, because that is what this is—this is a new tax. In addition to that, it also highlights comments that have been made during the course of this week with regard to the pandemic legislation about the government’s honesty, because in the lead-up to the 2014 election the Premier stood up on national television and said to all Victorians that there would be no new taxes under his government. Between then and now there have been 39 new or expanded taxes—39, and this is the big 4-0. Forty new taxes since this government came to office, and of course we could never accuse the government of not going back to the well many, many times, because once again it has decided to go to an industry that contributes nearly 60 per cent of the total tax revenue raised by this government. For the housing and development sector, this will be the 19th new tax imposed on this industry alone, which at this time, as has been said before, is the wrong tax at the wrong time and will be a handbrake on the Victorian recovery.

It is not up to industry to bail the government out every time they lose control of the books. It is not up to them; it is up to the government to manage their books well. You would think that when a government has borrowed $155 billion and introduced 39 new and expanded taxes they would have enough money. You may think that instead of taxing an industry that they have already taxed 19 times they might start to think that they could manage their major projects a little bit better, maybe without the overruns that we have seen, which the Auditor-General has put on display for us. Again this is not the opposition saying this, the Auditor-General has said those major projects are in excess of $23 billion over budget. You would think that they would look at the way they were managing the books themselves, but I suppose that it is just much easier to tax an industry and go back to that well again and again and again.

I want to just raise some of the issues that appeared in a Herald Sun opinion piece the Treasurer of Victoria wrote. In his piece I thought his insinuating that Victorians have no say in government rezoning of land and they are just ruthless money grabbers was wrong. It was just wrong. Government rezoning does not happen overnight. It takes a long time, as the member for Bentleigh pointed out in pretty well direct opposition to what the Treasurer was saying in his piece. The thought that Victorians are actively scheming over the benefits of rezoning is ridiculous and largely wrong. It is also wrong for the government to say that rezoning creates value—it actually releases the value. It is what the government should be doing. And, as the member for Ripon pointed out, it is particularly an issue in those regional areas. The government is not gifting anything to anyone by rezoning land, it is releasing land for people to live on and making sure that we can have industry in those areas as well. It is just a nonsense for the Treasurer to make the inference that the industry is greedy and sitting there waiting for people to profit unfairly. I also want to point out that the Treasurer said in his opinion piece that this tax is, and I quote:

… about creating incentives for the long-term planning and investments in our state.

My goodness. Who would think that you would incentivise an industry by taxing them? That is just bizarre; it is just a bizarre thought. I cannot imagine what mind thought that you would promote an industry, incentivise an industry, by taxing them.

Let me tell you a little something about what it means for the long-term planning and investment of the state. Already we find that just after this tax was announced in South Australia the Treasurer there, Rob Lucas, was so excited—I have met him, and he is not usually an excitable fellow, but he was very excited—he said in the paper:

The decision the Victorian government has taken is music to our ears …

Just in the last few days I have had telephone calls and discussions with business interest developers and investors from Victoria who are now seriously looking at future industrial and commercial property investments in South Australia.

You may say that that is just the government out there speaking loudly about this stuff, trying to take advantage of the opportunity, but the reality is that the Urban Development Institute of Australia’s South Australian chief executive labelled Victoria’s changes as ludicrous. This is the South Australian chief of the UDIA. He said:

The Victorian proposal to tax land based on its increased value from rezoning fails to recognise the time, risk and a plethora of other complexities that are involved in development, particularly infill sites …

He went on to say:

It’s a real opportunity for us to claim this as a competitive advantage for SA.

The South Australian Property Council of Australia boss, Daniel Gannon:

… agreed the state had a “great opportunity—

the state being South Australia—

to harness new investment”, as modelling showed investors would pay a whopping 308 per cent more tax on Victorian commercial properties … when compared with SA.

I go on.

High-profile SA property investor Steve Maras said his company … had been “actively looking” to invest in Victoria for the last three years.

Well, that is a good thing. Would you agree that is a good thing, particularly in these times? He said:

We bought a couple of properties (in Victoria), but there is now no incentive for us to continue looking to do things over there …

We can say goodbye to his investment too.

The various property groups here in Victoria—the Property Council of Australia, the UDIA, the Housing Industry Association and Master Builders Association of Victoria, who I, as an aside, would like to thank for their very informative and detailed and considered briefings—have done independent modelling. The modelling has shown that about 20 000 direct jobs will be lost and about 7000 new homes will not be built, including 300 affordable, social or disabled-access dwellings. We already have a social housing crisis in this state; this is just going to exacerbate it. Those groups went on to say that the lack of forethought regarding the consequences of the tax are exemplified by the way it will hurt regional Victoria, and the member for Ripon very eloquently pointed those issues out.

The message we are getting from these property groups is basically that this tax will hurt the industry significantly, it will hurt job creation, it will hurt the ability for the state to establish the homes that it needs going forward and it is just, in short, a very, very bad tax. As the member for Ripon said, the money will bleed from the regions. It will go into consolidated revenue and will not go back to those regions, so those regions miss out time and time again.

The modelling that these industry groups have put forward the government is at odds with. The government, however, is saying that this detailed modelling, done independently by four industry groups who would know their industry back to front in detail—and if members of the house had met the heads of all four of these groups, they would know that they are very intelligent people who represent their industry groups very well and with great staff have put out some great modelling—is wrong, but the government cannot produce any modelling to prove that, and the government cannot actually say how much revenue this particular tax will bring in.

We have got a common thread here of the government just refusing to release modelling, refusing to show how they make their decisions and what the outcome of these particular decisions will be. And that is very concerning because we are not in a position to lose any more jobs. We are not in a position to lose any investment. We actually want to encourage investment. Too many people have lost their jobs. Too many people are in such a dire situation, having spent the last two years under lockdown under this government’s draconian restrictions. We need to encourage investment, and taxing an industry—for the 19th time, may I add—is just the wrong thing to do at the wrong time.

I just want to raise, finally, a question about the ability of this government to actually implement this tax because this tax is plainly income tax, a capital gains tax. State government has no constitutional right to impose income tax, and there are already challenges in preparation to show this government that in fact it does not have a constitutional right to implement these taxes. So I am interested to see how that will end up—I am interested to see where those particular legal challenges will go—but it seems pretty clear to me that the government does not have the constitutional right to implement this tax in the way it is put together right now.

In short, this is the wrong tax at the wrong time. The government needs to find other ways of balancing its books—maybe just managing them competently would be a start. This tax will cost jobs. It will clearly force investment away from our borders, as the representatives in South Australia have clearly shown. It is a damaging bill, it is a short-sighted bill, and as a member of the Liberal Party I am proud to oppose this tax.

 Ms THEOPHANOUS (Northcote) (16:33): I rise to speak in support of the Windfall Gains Tax and State Taxation and Other Acts Further Amendment Bill 2021, and it is disappointing to see that those opposite are not supporting this sensible bill. As our state continues its journey towards social and economic recovery from the pandemic, we have a unique opportunity and a responsibility to build a fairer, more prosperous and just society. All aspects of government policy have a role to play in delivering better outcomes for Victorians, including our tax system. Our tax system should work for the good of all of us, creating revenue streams that ensure we can continue to deliver the services and infrastructure our communities need in a way that aligns with people’s ability to pay as well as the values and priorities of Victorians.

This bill reflects the government’s commitment to ensuring our tax system remains fair and supports our strong financial management. In addition to implementing budget revenue and tax relief measures from the last two Victorian budgets in a fair and efficient way, many of the amendments in this bill serve an additional purpose. Whether it be improving the integrity of our planning system or supporting the delivery of more safe and affordable homes, this government is about improving outcomes for Victorians.

One of the principal measures contained in this bill is the introduction of a windfall gains tax where rezoning decisions deliver a land value uplift of over $100 000. We know that when land is rezoned to expand the ways in which it can be used, landholders can often see an immediate and substantial increase in the value of that land. So, for example, industrially zoned land can be rezoned residential and immediately be worth more. The windfalls derived from these planning scheme amendments currently go solely to the lucky landowner. With this bill we are making sure that high-end property developers pay their fair share, and that will be up to 50 per cent of the value uplift. This is both fair and efficient. What it means is that multimillion-dollar profits can go back to the community through government investment in services and infrastructure. Brendan Coates, the director of economic policy at the Grattan Institute, has said of this measure:

As a tax, collecting unearned windfall gains is extraordinarily efficient, so efficient it shouldn’t even be called a tax but a charge for a change in allowable land use, which is what it is.

As someone who has grown up in and represents an inner urban area, I am acutely aware of the impact development can have on our communities. Our population is growing rapidly in the inner north and this has meant some pretty dramatic development, particularly at the site of the former Alphington paper mill where over 16 hectares is being redeveloped into multilevel residential homes. Planning for that kind of growth means carefully balancing the need for more homes with the impact on our environment, open space and neighbourhoods. But it also means planning for more services and infrastructure—services like health and education, infrastructure like roads and cycling connections and more opportunities to create local jobs. Those things require funding. The introduction of the windfall gains tax will help support the delivery of these critical things by creating a new revenue stream.

Critically, it will also improve the integrity of our planning system by reducing incentives for corruption when planning applications are decided. Too many times we have seen some pretty dubious dealings when it comes to developers buying up land and then reaping massive profits when the land is rezoned. Then the government is left to pick up the tab for public infrastructure on land with newly inflated land prices. All this does is lead to poor outcomes for our community. It exacerbates wealth inequality and it is not fair.

Now, I want to address a couple of the natural anxieties that might arise from a new measure like this. The changes will only apply to windfalls over $100 000, and a series of exemptions will mean the measures do not impact the family home, holiday home or residential investment properties. This is meant for higher end development projects, not your mum-and-dad investors. We are also continuing to support the important work of our charities by providing an exemption when the rezoned land continues to be used for charitable purposes for 15 years. Farmers will also be excluded from windfall gains tax when land is rezoned to any other rural zone, excluding a rural living zone, allowing them to continue farming unimpacted.

Finally, I want to address the spurious argument that windfall gains tax will scare off developers and substantially impact housing affordability. It is just naive to assume that rezoning windfalls have resulted in cheaper housing. Do you really think that landowners pass on these windfall gains when they get them? Developers do not pass on their windfalls to home owners. They continue to charge the maximum the market will bear because they operate in a competitive market.

 Ms HUTCHINS (Sydenham—Minister for Crime Prevention, Minister for Corrections, Minister for Youth Justice, Minister for Victim Support) (16:39): I move:

That the debate be now adjourned.

Motion agreed to and debate adjourned.

Ordered that debate be adjourned until later this day.