Wednesday, 1 May 2024

Bills

Commercial and Industrial Property Tax Reform Bill 2024

Second reading

Debate resumed.

Paul HAMER (Box Hill) (14:59): I come back to the bill, which I was making a contribution to before the lunch interval. I thought I would use the time that I have remaining to summarise my contribution from earlier about the importance of this reform in removing barriers to more effective investment, particularly in our key commercial and business precincts, Box Hill obviously being one of the most important commercial and business precincts in our metropolitan area.

While there could be some who want the stamp duty removed immediately and to immediately switch over to a land tax, the bill does propose a transitional reform that will commence on 1 July this year. If a commercial or industrial property is contracted after 1 July this year, a 10-year transition period will commence for that property. As has already been flagged by other speakers, at settlement the purchaser will have a choice of paying the property’s final stamp duty liability as an up-front sum or through a government-facilitated transition loan, and then when the next transaction occurs – (Time expired)

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

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

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

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

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

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

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

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

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

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

Kathleen MATTHEWS-WARD (Broadmeadows) (15:12): I rise to support the Commercial and Industrial Property Tax Reform Bill 2024. Land transfer duty has long been recommended for reform. Numerous inquiries over recent decades, including the Henry tax review, the Productivity Commission and the Grattan Institute, have all shared the same view. The up-front cost of stamp duty can be a significant financial barrier for potential businesses starting up or relocating. This can discourage businesses from investing or expanding operations at a time when Victoria’s economy is showing no sign of slowing down, thanks to the work of the Allan Labor government. The Australian Bureau of Statistics data shows that an additional 5800 Victorians found jobs in March, bringing the total working population to more than 3.7 million. This reform will see a progressive removal of the up-front cost of stamp duty on commercial and industrial property purchases sold with a contract date after 1 July 2024, freeing up capital for businesses to employ more workers.

As of 1 July this year any purchases of applicable zoned properties will have stamp duty payable one final time, and the property will enter the 10-year transition period to commercial and industrial property tax, CIPT. The purchaser will have the choice to either pay the property’s final land tax transfer duty liability as an up-front lump sum or finance the land transfer duty through a government-facilitated transition loan, allowing them to make annual loan repayments over 10 years equivalent to the property’s final up-front land transfer duty liability plus interest. The loan will be provided by the Treasury Corporation of Victoria on commercial terms, including a fixed market-based interest rate. Annual repayments over 10 years will be set up-front to provide applicants with certainty. The loan will be of particular benefit to small and medium-sized businesses as it will be available for property with a purchase price of up to $30 million. If the same property sells at a subsequent time, a duty exemption will apply as long as the property still has a commercial or industrial use – a huge saving incentive for investment into our business economy.

After a 10-year transition period after the entry transaction, a more efficient tax, CIPT, will apply to such properties annually. It will apply to properties that entered the tax reform scheme at least 10 years prior, having a contract date after the 1st of the 7th this year, being used for qualifying commercial or industrial purposes including eligible student accommodation – which adds to housing – and not being exempt from land tax. CIPT does not apply to properties that have not entered the reform, and it ceases to apply if the property is converted to a use that is not commercial or industrial. CIPT will be set at a flat 1 per cent of the property’s unimproved land value. This will drive business growth and boost jobs, especially in local economies and industrial precincts like Broadmeadows and Campbellfield, as a duty will no longer be applicable to that property.

Exemptions that apply to land tax will also be applied to property tax for commercial or industrial property. Any commercial or industrial property primarily used for primary production, community services or sport, heritage or cultural purposes will be exempt from CIPT if the criteria for exemption under the Land Tax Act 2005 are met. Duty concessions will also still apply to entry transactions – for example, the existing 50 per cent concession for regional, commercial and industrial land. The Melbourne Industrial and Commercial Land Use Plan of 2020 was developed to ensure that there is sufficient land to meet future demand for a range of business purposes and to support Victoria’s competitive advantage in attracting economic investment. The northern region in the plan contains my electorate, the local council of Hume and the northern growth corridor. There is significant opportunity for future industry and housing due to the proximity of the major connecting freeways and airports, and working close to home has always been a priority for local people. Key industries within Broadmeadows are transport, logistics, warehousing, advanced manufacturing, circular economy, construction and retail trade, all of which will benefit from the new reform.

The Allan Labor government’s landmark Big Housing Build has also been a driving force behind the construction sector’s growth and confidence. The plan is anticipated to require upwards of a 40 per cent increase in the supply of commercial floor space within the Broadmeadows metropolitan activity centre. The tax reform will encourage local businesses investing and trading close to home in the major hub currently there, with significant retailing, entertainment and office facilities already thriving and tenancy rates at an all-time high.

There are approximately 265,000 commercial and industrial properties in Victoria, and ABS national accounts data show our state had the largest business investment increase of all the states in 2023, an increase of more than 13 per cent. This was in addition to growth of 8 per cent in the previous year. Melbourne maintains a significant industry sector and has been able to be agile and keep up with the changes in economic demands and trends. With the continued uncertainty in international supply chains and the growing need to produce more products here in Australia, I wholeheartedly support changes that encourage local manufacturing growth and capability, like this reform.

I also appreciate the significant investment the Victorian Labor government has made over the last decade, including $21 million recently to establish a Manufacturing and Industry Sovereignty Fund, providing grants to support the development, expansion and retention of Victoria’s strategic manufacturing capability. After years of inaction at a federal level by the coalition government, Australia was ranked last in the OECD when it came to manufacturing self-sufficiency. I am very proud of federal Labor’s $15 billion National Reconstruction Fund to turn this around. The fund will revive our ability to make world-class products and, in the process, diversify our economies and create secure, well-paid jobs for Australians.

Growth in freight and logistics is increasing in importance to serve our growing population, and as online shopping becomes more prevalent I have been known to keep a few freight and delivery services busy myself on occasion. I was honoured recently to attend the opening of a significant industrial investment in Campbellfield, with Centuria opening five new warehouses in the M80 Connect super-prime facility, along with the member for Greenvale. The development will create 280 ‍new local jobs for the community and contributes to the job growth, business diversity, economic growth and overall identity of the Broadmeadows electorate. We have the enviable location of being a mere 15 kilometres from Melbourne’s CBD, 10 kilometres from Tullamarine Airport and 17.5 kilometres from the Port of Melbourne, with direct access to the Metropolitan Ring Road.

Progress is going well on the $400 million Somerton intermodal freight terminal being built in partnership with Aware Super, and I thank Aware Super for the incredible investment they are making in our community. This employment estate will create hundreds of quality jobs and reduce thousands of tonnes of carbon emissions each year. I thank Minister Horne and the member for Greenvale for their support of this project. I would also like to say a big thankyou to Hume City Council for their leadership and for their fabulous economic development team, who work in partnership with industry and state government to ensure that we have great jobs of the future locally.

The CIPT reform will allow further investment into the local industrial and commercial opportunities that my electorate provides. I was fortunate to be part of the recent announcement by Minister Dimopoulos of the Victorian Labor government’s circular economy grants, including $2.5 million towards the establishment of a state-of-the-art lithium battery processing and recycling plant in Campbellfield, enabling them to expand operations, employ more staff and recycle more batteries. I am so proud to be part of a Labor government that is investing in transforming the waste and recycling sector and aims to divert 80 per cent of waste from landfill by 2030. Even though it is illegal to put batteries in landfill, only 12 per cent of batteries are recycled every year, so we really need to do better.

I have long been passionate about the benefits of a circular economy and reducing landfill, and my family and friends will attest to my waste-sorting processes and reuse philosophies, including my sister, who once received a library book from me for Christmas. Yes, she had to return it after she enjoyed reading it. I am pleased to say that Campbellfield, within my Broadmeadows electorate, is the circular economy capital of Victoria. Much of the local industrial land is devoted to mining resources from existing resources, saving on landfill and reducing the need to mine raw materials. Minister Dimopoulos and I along with mayor Naim Kurt visited Simon at Rock Reck in Campbellfield, who takes in construction concrete and rubble for free from demolished homes and recycles it into slab-grade and road-grade materials, of which there is a shortage. The new reform will make it more financially viable for these sorts of businesses and companies to continue their work transitioning Victoria to a sustainable circular economy.

Stamp duty has long been a financial barrier for both commercial and residential property purchases in Victoria. I remember back to when Joe and I were looking at making our first property purchase as newlyweds. We ended up buying a four-bedroom home for just the two of us. We knew at some point in the future we hoped to fill it, but we were keen to avoid paying stamp duty on multiple properties along the way, and I know of many people living in houses of a size they no longer need, to avoid paying stamp duty. Thankfully, there have been some welcome additional residential stamp duty financial supports introduced since we purchased nearly 25 years ago. Several concessions now exist to ease the burden of land transfer duty on residential property purchases, including the first home buyer, principal place of residence and pensioner concessions.

Labor is making history by being the first government in Victoria to eliminate stamp duty on commercial and industrial properties in this state. This reform will encourage businesses to invest, to create jobs and to grow. It will help drive productivity in our state and will facilitate the transition in a manner that supports businesses in a sustainable way. The bill also makes consequential amendments to other acts to ensure that the reform can be administered so that the treatment aligns with land tax.

Roma BRITNELL (South-West Coast) (15:22): I rise to speak on the Commercial and Industrial Property Tax Reform Bill 2024. This is a bill that will replace stamp duty for commercial and industrial properties with an annual property tax over time. I understand that the purpose of the bill is something that has been discussed for a long time in different states and across the country – whether stamp duty up-front or stamp duty over time is a better way of encouraging business. That discussion is something that I have listened to over time, and I can understand the concept. We as Liberals and Nationals always support reforms that enable people to do business in Victoria.

However, I note the textual amendments and the reasoned amendment put forward by the Shadow Treasurer and support them because there are some flaws within this bill, and with proper amendments and good debate we could actually come up with a better approach than this bill in its current form. This bill actually suggests a figure of 1 per cent over time that every year is paid on the property, and our research and budgetary figures done by the Parliamentary Budget Office show that in effect this is actually an increase in the amount of money that will end up going to the government. I do not think that is what was intended, but I am not surprised – there are always these little hidden ways of the Labor government trying to grab some money in an underhanded sort of sneaky way, which is what I see that as. That is why I support the amendments; 0.8 is a much fairer figure in the metropolitan area.

But there is no consideration in the bill for regional Victorians. Regional Victorians have had for many, many, many years a concession for stamp duty, if you are purchasing a commercial property in the region, of 50 per cent less than metropolitan areas. The fact that this bill actually gets rid of that is another sneaky way of this government actually getting more income from this change and not just trying to incentivise business, as they claim this is supposed to achieve. It is really disappointing that they have forgotten regional Victorians, but not surprising. The amendment suggesting 4 per cent as a figure for regional Victorians is fair and reasonable. The bill very much disadvantages the country areas. Into the future stamp duty will be charged every year if you purchase a property after this comes into effect and the transition period is over.

Many commercial businesses in my region have been in the ownership of the business owner or the families for years – I think of Callaghan Motors, Owen Truss. Effectively, for those businesses in their current form, if the families did that again into the future, if they purchased a business like Callaghan, which is a car sales place with land and the business, they would be paying the stamp duty. Callaghans have owned that for I think it is nearly 100 years – they celebrated a very big milestone recently. They are paying it every year, whereas in this bill there is no end to this. If you pay it up-front, that ends. It just seems a little bit unfair for the regions, so there does need to be regional consideration where we do see businesses held for a very long time. This claim that there will be a $50 billion uplift because it makes businesses more attractive to be able to pay it up-front – the concept is correct, but with the $50 billion there is no evidence being supplied by the government. If the work has been done by Ernst ‍& Young and there is a report, why is the government holding that report back? Why are they not supplying the documentation to support these claims? It is a bit disappointing, especially when you see that the state of South Australia actually has abolished stamp duty and not introduced any other tax. If they want to make these claims that it will improve business, then support that.

I do see that this is very much just a disguised way of grabbing extra money. It is another tax – one of the 53 new taxes that this government has brought in in the last 10 years after saying very clearly the night before the election that there would be no new taxes under this government. They were Premier Daniel Andrews’s very words, in opposition at the time, and 10 years later what we have seen is no less than 53 new taxes – tax on education, tax on health, tax on holidays, tax on renters. Taxes on properties – this bill is another – are 27 of those 53 new taxes. It is absolutely clear that this government do not understand what actually needs to happen to encourage people to get into property so we do not have the housing crisis that we are in. It is absolutely no surprise that we are in a housing crisis when you look back and work out what has gone on, because the government simply do not understand what economic levers affect.

If you look at the comments that were made by the member for Tarneit earlier today or yesterday, he said that Victoria is the greatest state to do business in – it has the best settings for business in the country. I would point out to the member for Tarneit: does he notice that 8000 businesses have left Victoria in the last year? That is not an indication that those quotes make any sense whatsoever. It is no surprise when we see a government who cannot manage money, cannot manage projects and have massive blowouts. The Melbourne tunnels, for example, are over budget by billions of dollars – out of control. When we have hospitals like we have in South-West Coast that need extra funding, it is just so distressing to see them be hell-bent on further expenditure on things like the Suburban Rail Loop, which is never going to help anyone in South-West Coast. But I will tell you now, the hospital build with the extra $100 million that we need will help many, many constituents in South-West Coast to get a hospital bed, to get that hip replacement and to be able to give birth in Portland feeling safe.

This government makes these promises and does not deliver. Last year in the budget the Portland Gymnastics Club was promised $1.25 million. Here we are 18 months later, and this is a tin shed; they need to extend it with a higher roof and put a lean-to on it. I built a dairy shed in six weeks – you have to do that when you have got cows calving between seasons. This is 18 months later. I spoke to them the other day: ‘What’s going on?’; ‘We haven’t been told anything. We haven’t got the money from the government. The government says they have to go through processes with the local council and the local council have to make applications.’ What a load of rot. It is $1.25 million to give to a gymnastics club to say, ‘We’re going to support you.’ Well, where is the support if 18 months later they are still waiting for the money? This government cannot manage money, makes promises it cannot keep and tells fibs. When you look at that rate of 1 per cent, it is actually not going to increase the amount of money that businesses have to pay over time – the government is not going to get any extra. None of it stacks up.

There is the propaganda that we get spun, but the reality – when you just scratch the surface and get a bit of the truth by looking at the figures – is nothing actually adds up. It is all coming out in the wash now. These 53 taxes are demonstrating that this is a government that has no idea how to run a state other than by reaching into the pockets of hardworking Australians – mums and dads, who are both often working day in, day out to make ends meet and are struggling. Whilst I keep saying that you might not get a bill from the state government and so it is harder to understand than your rates bill, open up your power bill and know full well that that bill is a result of this government pulling the wrong levers and ending up with power prices increasing.

That is what is going to happen with this stamp duty as well. There will be more money going into the pocket of the government than there was before. They can say all they like and that it will not, but it is quite clear when you look at regional Victoria, if properties were getting a discount of 50 per cent and it is not even considered in this bill, clearly those properties are going to be paying twice as much. The example is if at the moment you are paying $55,000 in stamp duty in regional Victoria on a commercial property that you purchased for $1 million, under this scheme in the future it will be around $100,000. That is a lot more money for businesses to have to find for their annual expenses – money which will go straight into the coffers of government – when they are working hard to bring in income which pays taxes to the government and brings income into Victoria.

I conclude by saying we have got 53 new taxes today, probably 54 tomorrow, a state budget next week and a state of Victoria in a parlous state.

Meng Heang TAK (Clarinda) (15:32): I am delighted to rise today to join with this side of the house to speak on the Commercial and Industrial Property Tax Reform Bill 2024, another important piece of legislation that will support business through the landmark reform to move away from stamp duty towards a more efficient tax to encourage business to invest and create jobs. As we have heard, this bill will transform commercial property tax by abolishing the up-front cost of stamp duty and replacing it with a more efficient commercial and industrial property tax, making it easier for businesses to set up, invest in new land and buildings and move to new locations.

These important reforms have been informed by ongoing consultation with key business and industry groups to ensure we support and encourage property owners through the transition by making it as simple, fair and consistent as possible. There is substantial support for these changes in the Clarinda electorate, amongst our thriving business and small family business community, and there is a good reason for widespread support among businesses and among the broader community. It is because, as we have heard, these reforms are expected to add thousands of jobs to Victoria’s economy and benefit the state’s economy by up to $50 billion over the next 40 years. These are positive changes for businesses and the community. This is another example of the Allan Labor government’s support for small business. We have seen that support in announcements and initiatives in recent times, and we have also seen some really positive engagement with Clarinda businesses from the Minister for Small Business.

In our local area – I share it with my good friend and neighbour the member for Mulgrave – we are lucky to have some great local organisations such as the Springvale Asian Business Association, also known as SABA, who are doing a wonderful job in coordinating and supporting many of the local traders in our diverse business community. For over three decades in fact they have been working and supporting our community, which is an amazing achievement. The president Daniel Cheng does a fantastic job, as do the committee volunteers Stan Chang and Vincent Golf. We are proud to support them in that work and in their endeavours. We have seen in recent times government support provided for multicultural trader associations – over $2 million – to support 10 peak multicultural trader associations to ensure that their members have the right access to services that they need. Furthermore, funding was confirmed in the 2023–24 state budget, and SABA is one of the associations announced to receive funding as part of this announcement. I am looking forward to working, along with the member for Mulgrave, with SABA and the department on consultation to help inform the design and delivery of that support program.

In fact a total of $17 million over four years was provided in the 2023–24 state budget for the supporting our multicultural traders and precincts initiative. That initiative includes $10 million to upgrade and revitalise business and cultural hubs in Victoria’s multicultural precincts, as well as $5 million for 500 training scholarships of 10 grand for workers in multicultural businesses. So all of these are really important and really exciting initiatives for our diverse community, who are the backbone of what I call small business operators.

When we talk about our multiculturalism generally, our minds often quickly talk about the festivals, the events, the food, the dance, the music, but it is all kinds of cultural celebrations which are very important. Another important aspect of that is our multicultural small business owners. They are such a large part of the fabric of our diverse community in Clarinda and across the south-east and throughout Victoria. It is so good to see the Minister for Small Business is here at the table. She represents the diverse community not only in her own electorate but in the wider electorate, which has a large, diverse community. I am very proud of our local small business community, and I am proud of the support provided to it from our government.

That support continues here today with this bill and the changes to stamp duty – landmark reform to move away from stamp duty and towards a more efficient tax to encourage businesses to invest and to create jobs. That is what we are doing here. The next purchasers of commercial or industrial property on or after 1 July 2024 pay stamp duty one last time. After a 10-year transition period after this entry transaction, a more efficient commercial and industrial property tax will apply to such properties annually. If the same property sells a subsequent time, a duty exemption will apply as long as the property still has a commercial or industrial use.

In terms of rates, the commercial and industrial property tax will have a flat rate of 1 per cent of the unimproved site value of the property, will have no tax-free threshold and will only apply to properties that are liable for land tax. Commercial and industrial property tax will be administered by the commissioner of state revenue, namely through the State Revenue Office. Furthermore, eligible purchasers will have the option of accessing a government-facilitated transition loan with commercial terms to fund their final stamp duty liability, freeing up capital for businesses to invest in expansion or employ more workers – so again another positive element to facilitate further investment and jobs. To do this, there are amendments to the Treasury Corporation of Victoria Act 1992, which will enable the Treasury Corporation of Victoria to administer the transition loan program.

Finally, the reform will apply to contracts entered into on or after 1 July 2024, with commercial and industrial property tax applying at the earliest in 2035. These are fairly straightforward changes but landmark changes, transformative changes, that will bring about some really positive impacts for investment and jobs in Victoria. I commend the Treasurer for bringing these changes forward – positive changes with positive impacts for business.

I also commend the Minister for Small Business. As I mentioned earlier, we have had some really positive engagement with local business, and we have had the minister out in the electorate on several occasions to talk to real traders. We have also had several engagements here in Parliament with the local traders associations, which has been really beneficial to building those partnerships.

I just would like to conclude that the Allan Labor government has a proud record of supporting Victoria’s multicultural communities and supporting small business, and we have seen that through the delivery of the many initiatives that have been mentioned and we also see it here today again in this building. These are landmark changes, moving away from stamp duty, moving towards a more efficient tax to encourage business to invest and to create new jobs to support our community – most importantly, dare I say, the multicultural community who run small businesses from their own experience, which they have acquired through their family generations and professions. I commend the changes, and I commend the bill to the house.

Sam HIBBINS (Prahran) (15:41): I rise to speak on behalf of the Greens to the Commercial and Industrial Property Tax Reform Bill 2024, a bill that proposes to phase out stamp duty on commercial and industrial property in Victoria and replace that stamp duty with a new annual commercial and industrial property tax, which would be set at a flat rate of 1 per cent of the property’s unimproved value. The way that the scheme is proposed to work is that will be payable 10 years after the final payment of stamp duty. Those who purchase commercial and industrial property will pay final stamp duty, and after 10 years they will pay that 1 per cent tax. There is also within the bill itself an option for purchasers to take up transition loans as an alternative to making the up-front payment and to be able to then have an annual repayment of the stamp duty. My understanding is that the scheme will be projected to be budget neutral over the long term.

The Greens have long pushed for stamp duty to be replaced with a broad-based land tax on residential properties, and we would really hope that a similar move as is being proposed with this bill would be a step in the right direction towards applying such a scheme to residential properties. It is fair to say when it comes to commercial and industrial properties, I think, that the same principles apply and that the stamp duty does act as a deterrent for businesses to shift premises as they grow and it is a tax on transactions, and that moving to an annual tax is a far more productive and efficient way of going about it and that it makes sense to do that.

However, these reforms are not going to obviously impact the vast majority of Victorians who are looking to enter into the property market, because that is the residential property market, and we really want to see much bolder and more urgent progress on abolishing or replacing residential stamp duty and replacing it with a broad-based land tax, because we are in a housing crisis. The housing system by design is not working; it is absolutely not working. We have got an entire generation of people who are locked out of owning their own homes, with housing becoming more and more unaffordable and people locked out of home ownership being pushed into housing insecurity and homelessness. Not only do we need to of course build more housing, more social housing and more public housing; we need to make sure we address the misallocation and inefficiency in the current housing stock. The distorted effects of stamp duty on the housing market are very well documented. It is a huge added up-front cost of purchasing a home. It is inefficient; it is inequitable. It hurts young people, retirees and people with growing families, targeting those who are really in need of moving house. It acts as a tax on really tough times in people’s lives – a tax on divorce. Over half of women who are divorced lose their home and do not buy again. They are more than three times more likely to rent in retirement than married women. Women over the age of 55 are the fastest growing group to experience homelessness in Australia.

It was really good to see that there was a parliamentary inquiry into this issue last year. The upper house inquiry found that residential stamp duty is inefficient, unpredictable and inequitable; called on the government to explore alternative models, including a switch on sale, credit or gradual transition proposals; and found that lowering stamp duty barriers would actually help facilitate greater worker mobility and stimulate economic growth. It found that stamp duty now accounts for more than one in five tax dollars collected in Victoria, up from one in nine three decades ago. According to the Grattan Institute, removing stamp duty or replacing stamp duty would also help fix Victoria’s housing crisis by reducing rents and reducing house prices, because Victorians would be more willing to move to a home that better suits their needs and make better use of the existing housing stock. There have been estimates that replacing stamp duty with a property tax nationwide could increase the number of people owning their own home by over 6 per cent, so we certainly would urge the government to really pursue this reform. It has been proposed, trialled or done in a number of jurisdictions, but we really would like to see the Victorian government lead the way because, as the Premier was saying, you have got to pull all the levers. There are a number of levers; this is one of them, and this is a big one, replacing stamp duty with a broad-based land tax for residential properties.

When it comes to commercial land, one of the things that certainly the Greens and I have been really concerned about is the extent of anti-competitive behaviour in the form of land banking by the supermarket duopoly, Coles and Woolworths. This is coming at a time when Victorians are really suffering from high grocery prices, and this is because of the concentrated supermarket we have got in Victoria and we have got nationwide. What is occurring is that major supermarket retailers, Coles and Woolworths, are purchasing large strategic areas of land, even if they do not have plans or permission to build there, with the aim of excluding and deterring would-be competitors from entering the market. Coles and Woolworths have got over 70 per cent of market share. They are dominating the supermarket industry, basically allowing them to set prices as high as they like, and they are posting billions of dollars of profit while Victorians are struggling to feed themselves and their families. Their market share and their profit margins are much higher than their overseas counterparts. I again call on the government to investigate the extent of these anti-competitive practices and look at the best way to stamp them out. Greater competition would force the supermarket duopoly to offer far more competitive prices and lower food prices for Victorians.

Another issue in terms of commercial property is the high vacancy rate of commercial industrial land. Developers can buy up large swathes of land that should be being used for commercial industrial properties, just waiting for it to be rezoned into residential land and reap huge windfall gains in the process, and we would like to see a much stronger windfall gains rezoning tax to guard against land that could be used for commercial industrial purposes being kept vacant so a developer can then reap those windfall profits.

We support this bill in principle. Again, I emphasise the need for the government to aggressively pursue the transition away from stamp duty towards land tax for residential properties – that is a reform that has been put in the too-hard basket for too long – and to investigate and stamp out the practice of supermarket land banking, which is driving up food and grocery prices. These are two really significant policy levers the state can use to lower the cost of housing and to make food more affordable. We will be supporting the bill in this place. I note the opposition have moved a number of amendments. We will not be supporting them in this place, but we will consider them should this bill proceed to the other place.

Lauren KATHAGE (Yan Yean) (15:50): I am really happy to get up and speak about the Commercial and Industrial Property Tax Reform Bill 2024. Straight off the bat I just want to put something to bed that those opposite seem to be unclear about. I would like to explain it to them: this bill includes the abolition of stamp duty for commercial and industrial properties. You might not have picked that up from their contributions – in fact I know that you did not. But I am here to make sure that everyone clearly understands that this bill includes the abolition of stamp duty for industrial and commercial properties. And why are we doing that? Why is this government taking that bold action? It is because we know that stamp duty on commercial and industrial properties discourages land from changing hands to the best value place it can be, to the best value hands it can be in, to make the most productive use of it, which benefits not just the business but our economy and our community.

We know that stamp duty also is difficult because it applies to the whole property value – not just the unimproved land but the improved elements of it as well. That means that stamp duty can act as a disincentive for business investment and property improvements, and we absolutely do not want that in Victoria. As we know, this state has an excellent record of supporting business, and we saw I think just recently that in 2023 business investment in Victoria outstripped all other states. We want to continue supporting and enabling businesses to have the opportunity to invest in the way that they want to. We know that stamp duty also has provided a volatile revenue source for states – for any state or any government – and that is due to the nature of improved and unimproved land being included, as well as the difference in sale. We know for example that in Western Australia they actually had a 50 per cent drop in commercial stamp duty one year, which makes it harder for responsible and easy budget management.

I just want to quickly say I am so glad to see the member for Sandringham has joined us. I would like to just go over a couple of the points that he raised in his contribution just to make it all so clear – as I did at the start – that we are in fact abolishing stamp duty for commercial and industrial properties. The member for Sandringham was worried about Belinda, I believe. Belinda was his fictional character in regional Victoria who had a property with an unimproved land value of $1 million and an improved value of $2 million, and he was concerned about the difference in the price of stamp duty and commercial and industrial property tax. Now, there are a few things that those opposite are failing to mention today. Like I said, they are failing to mention that we are abolishing stamp duty for commercial and industrial properties. They are also failing to mention that the lower stamp duty rates in regional Victoria are – drumroll – an action of this government. This government is the government that brought in reduced stamp duty for regional Victoria. We brought in reduced payroll tax rates for regional Victoria.

What the member for Sandringham also failed to reflect on – or what he might like to explain to Belinda perhaps – is that one of the reasons that we are moving to the unimproved land as the basis of the tax rate rather than the improved value, as per stamp duty, is because we are not taxing improved value. Belinda’s stamp duty is based on her improved value, so Belinda perhaps had reason not to invest in her property because she – or people who purchase it in the future – may have been concerned about stamp duty. So I am glad that we can clear that up for the member for Sandringham. The shortcomings of stamp duty that we have tried to remedy through previous government initiatives are what we are doing away with through this bill. Their concern for regional Victoria is all talk, and actually the action has all been from this side of the house. So I hope that is really clear to everybody here.

They were also worried about the bill being overly complex. At the same time as they were saying out of one side of their mouths that they were worried the bill was overly complex, they were saying through the other side of their mouths that they were wanting to introduce variable tax rates, so in fact they are the ones seeking to introduce complexity into what is a fairly straightforward change that is proposed.

The new replacement of stamp duty with the property tax is better because it is more efficient. I think everyone can agree that land is immobile. It is not going anywhere. It cannot be shifted out of supply, and because of that it becomes a really efficient way to tax, because it is not something that can be moved in other ways. It is a more reliable and more stable source of government income that is less prone to the vagaries of the international market, international inflation and the like. It means that we can make a more productive use of the land that we have, and that is better for our economy, it is better for jobs and it is better for our community. They were questioning our understanding of the improvement to our economy through this change, but in fact an OECD report found that a 1 per cent switch to property tax would improve long-run GDP per capita by 2.5 percentage points. That is not us saying that, that is the OECD, so if they have a concern, perhaps they could take it up with them.

The other thing that makes the proposed system better is that the tax is not triggered by a transaction. That can distort business investment choices and business decisions. They might choose to remain in a property rather than step out and purchase one somewhere else. As the member for Yan Yean, as a member in a new growth area with greenfield sites, I want businesses to be buying commercial and industrial properties up in our new areas, because they will be creating jobs for all of the people that live in our communities. By abolishing stamp duty for commercial and industrial properties, we are stimulating businesses to have the confidence to purchase properties in our area. For example, in Wallan East at the moment there is a site being prepared for industrial businesses. They have cleared and they are levelling the land, and I am excited to see that, because when I see that vacant block, when I see the sign up for the sale of industrial blocks, I see jobs. I see jobs for the members of my community, and that is why I am so glad to support this change.

At a recent business forum that I hosted in Donnybrook with the Minister for Small Business, I met many business owners who discussed the desire to have their own location, their own site, for the manufacture of their goods and the selling of their goods, rather than needing to rent from somebody. Abolishing stamp duty for these people will make it easier for them to invest and to grow their business, and through doing that they will help us to create more jobs. We know that with the economic growth in Victoria over the next five years, which is expected to be the highest in the nation, jobs just flow here. As has been said a few times today, Victoria is leading the nation in jobs growth. Since the 2020 peak of the pandemic, over half a million new jobs have been created across the state.

Make no mistake, this is a bold reform. This is a massive change for this state. Our Treasurer has set out a very clear, very simple and very clever way to create a more efficient, stable tax base for the state while at the same time encouraging business growth leading to jobs. I commend this bill to the house.

Business interrupted under sessional orders.