Thursday, 2 May 2024
Bills
Commercial and Industrial Property Tax Reform Bill 2024
Bills
Commercial and Industrial Property Tax Reform Bill 2024
Second reading
Debate resumed.
Kat THEOPHANOUS (Northcote) (14:53): Where we left off just before lunch was that I was talking about our government’s investment in the future of our state and our economy and the fact that it is working. Victoria’s robust economy has once again recorded Australia’s strongest jobs growth over the past year, delivering the lowest unemployment rate of all of the states. Since November 2014 our economy has generated almost 800,000 new jobs, including more than 170,000 jobs in regional Victoria. We will keep working to boost Victoria’s economy with targeted industry investments to drive innovation, secure our supply chains, support businesses and back our regions.
This reform to abolish stamp duty is a key part of that work. Currently when you buy or acquire a commercial or industrial property in Victoria you pay land transfer duty, also called stamp duty. Stamp duty adds to the cost of purchasing property. When applied to commercial and industrial properties it discourages businesses from investing, expanding or relocating their operations, impeding growth and productivity. The changes contained in the bill address this problem by abolishing stamp duty for commercial and industrial properties that are sold after 1 July 2024, with land transfer duty to be replaced for these properties by a new commercial and industrial property tax after 10 years.
Just to be really clear on how this works: if a commercial or industrial property is contracted on or after that date – at settlement – a 10-year transition period will commence for that property. Additionally, at settlement the purchaser will have a choice to either pay the property’s final land 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. The new tax will start 10 years after the initial transaction regardless of whether the property has been transacted since. It will be set at a flat 1 per cent of the property’s unimproved land value.
Economic modelling suggests that after 40 years this reform will have added 12,600 jobs to Victoria’s economy and will have increased the size of the Victorian real economy by a cumulative $50 billion in net present value terms. There are approximately 265,000 commercial and industrial properties in Victoria, so removing up-front costs on these types of purchases will accelerate business growth and boost jobs. It will mean that businesses can make that decision to move into a larger warehouse, for instance, to grow their workforce, to invest in better machinery or to refurb their space. Quite simply it gives business owners more choice and more ability to take that next step in their business journey.
And it is not just us saying so. As others have quoted, but for the benefit of my community in the inner north, Paul Guerra, CEO of the Victorian Chamber of Commerce and Industry, did comment that:
This is exactly the type of progressive tax reform that is required to free up stamp duty charges which will accelerate building upgrades, stimulate investment in commercial property and free up more capital.
Importantly, this change is designed to happen gradually over time as properties change hands, and it is revenue neutral – not an increase, as those opposite would have us believe. It simply replaces the lump sum stamp duty, which is a burden and an inhibitor to business growth.
It is important to note that the existing concessions and exemptions available for land transfer duty on commercial and industrial property will continue to be available when the reform commences, and that includes exemptions for transfers on deceased estates, a transfer to a spouse or a partner and purchases by charities and friendly associations or indeed the concessions for properties purchased in regional Victoria for commercial, industrial and other industry purposes.
These reforms are not done in isolation; they are delivered in the context of our broad suite of reforms to make things fairer for businesses, not least of which is the increase to the payroll tax threshold. Payroll tax is something I have spoken to many businesses about in my community, and the message has been loud and clear that the threshold is too low. So to better support small businesses across our state, from 1 July this year we will be raising the tax-free threshold to $900,000, with a further increase to $1 million from 1 July 2025. This is going to have a massive impact. We are also cutting the cost of running a business further by abolishing business insurance duty, becoming the first state in Australia to do so.
As the member for Northcote, I will continue to stand up for our local businesses in the inner north, and I described them in detail earlier in my contribution. From our shopfront traders right through to the dedicated manufacturers and those on the cutting edge of innovation that need that extra capital to be able to push their businesses to the next level – it is for them that this bill is coming through. This is a transformational step. It will have a tangible, positive impact in our community, in our business community, in our state. I commend the Treasurer for bringing it forward, and I commend the bill to the house.
Wayne FARNHAM (Narracan) (14:59): I am pleased to rise today on the Commercial and Industrial Property Tax Reform Bill 2024. It has been interesting listening to the debate today. The purpose of the bill is essentially to, we will say, ‘reform’ stamp duty in the commercial and industrial property area and go to a 1 per cent tax. I have spoken to a few people about this bill, and I have listened to a few of the contributions here today. Although we do not have an opposing position, there are different narratives that have been going on. I suppose the one thing that concerns me about it is if we look at regional Victoria in particular and the reason for the amendments by the Shadow Treasurer to adjust the rate at 0.4 per cent, in regional Victoria at the moment we get a 50 per cent concession on stamp duty, which really does help drive investment into regional Victoria. It is important, especially in my community, that we do get investment to come back. With the absence of native timber logging and a few other industries that have now gone by the wayside, this discount for regional Victoria is extremely important.
We need to incentivise people, I agree. We need to get vacant land moving. We need to get the economy moving. We need to create jobs, and job creation equates to tax revenue at the end of the day, because people will spend more money. But I am not quite sure if I am totally convinced about the bill at the moment. The government have stated up to $50 billion in cumulative net present value will be generated over the next 40 years due to this reform. Deloitte conducted the modelling to determine this figure. Their modelling assumes that removing stamp duty will see a greater quantum of property transactions and will incentivise the development of commercial and industrial land stock.
The point I make here is the word ‘assumes’ – I do not think we can ever assume that a bill will have the effect that it is intended to. In conversations with people I know that own industrial property and commercial property, when I explain the bill to them and I say, ‘Well, if you buy a $1 million block and the stamp duty on that block is about $55,000, sure, you get 10 years to pay that off – which is fine – with various interest applied to the loan; then when you calculate it in 10 years time, the unimproved value of that land might be worth $1.2 million or $1.3 million, and you are then paying 1 per cent of that. Effectively you will be paying that stamp duty again in five years time.’ When I explain to people how this bill works, they are a little bit hesitant. I am not saying the bill is totally wrong. All I am saying is I do not know if it is going to have the consequences it is intended to have, and that is having more transactions in the commercial and industrial space.
One comment to me from a property owner I know was, ‘Why would I sell my property that I own now, which I have paid the stamp duty on, to upgrade, and incur paying another stamp duty on the next property, then be subject to that 1 per cent every year after that?’ Essentially the 1 per cent is a tax. That is what it is. This will come on top of the taxes we have at the moment, especially around the land tax, which we have seen rise significantly – 200 per cent, 300 per cent, 400 per cent, 500 per cent in some cases. So I am not sure that this bill is going to incentivise people as it intends to do. As I said, this will come on top of the land tax. I know within the bill we say that this charge cannot be passed on to tenants. Well, I think you will find a commercial reality of this is a lot of landlords will pass this on to the tenant. A lot of landlords will say, ‘Okay, well, I have got to pay this 1 per cent levy – that is another $13,000; I can only absorb so much through the increases in land taxes and whatever other taxes are coming through.’ So it could possibly be more than likely that this 1 per cent does get passed on when they renew the lease. Their lease will go up that $200 to $300 a week to cover the cost of that 1 per cent. I know it is not the intent of the bill, I know what the law says, but the commercial reality is completely different when it comes to negotiations. Once you have negotiated a lease, both parties will sign off on it and away they go. That does concern me around this. I just do not know if it is going to get the intended effect.
It does affect a lot of properties. In the Australian valuation property classifications, it goes from codes 200 to 449 and 600 to 699. I actually did look them up, and that is hundreds and hundreds of different classifications. It does affect a wide range of properties, and it will be a wide range of transactions where this tax comes into play. There are some exemptions in there when we talk about this, but another concern for me is if the purchaser decides to take up the government’s offer of paying the stamp duty off over a 10-year period with a base rate of 4.87 per cent – and that is okay; I do not have a problem with that – the margin risk rate of 2.25 per cent is set by one person and one person only, and that is the Treasurer. I do get a little bit concerned when we put that amount of faith in one person. I do not know the Treasurer well. I do not know if he is a good guy or a bad guy.
A member: No, he is a great guy.
Wayne FARNHAM: I am sure he is. I know my hairdresser is a bit better than his, and he is a great guy. But it does worry me that a margin of 2.25 per cent is set just by the Treasurer. That is concerning. I thought maybe a panel to review the rate would be the way to go so you have varying opinions around the rate, but for one person to decide the rate I think could be a little bit dangerous. We could be having a bad year and that margin could be decided to be 5 per cent. Who knows. I do not know. But it does not have to come back to the Parliament, it is only set by the Treasurer, and I think that causes some concern.
The Shadow Treasurer did move a reasoned amendment on this bill, and I think it is important that the government take note of this reasoned amendment, because it is there especially to protect regional Victoria, as I stated earlier, and that 50 per cent deduction they do get now.
The SPEAKER: Order! The sitting of the house is suspended. Members, please leave in an orderly manner and follow the direction of the fire wardens to the exits and the assembly areas.
Sitting suspended 3:06 pm until 3:30 pm.
Wayne FARNHAM: I was talking about the reasoned amendment that the Shadow Treasurer put forward, if I remember correctly, and I will just touch on it briefly. The amendment requires:
(1) further consultation on the proposed CIPT rate including the cost neutrality of the proposed reforms and how the reforms will affect owners of regional and non-regional commercial and industrial properties;
(2) providing investors with certainty and confidence against any potential future tax increases; and
(3) making public the modelling assumptions underpinning the $50 billion economic uplift anticipated from this reform scheme and the rationale for the risk margin component of the proposed 10-year transitional government loan, including any future changes made to the risk margin component of the loan rate’.
I do feel that these reasoned amendment requirements are logical, and I think they are in there for good reason, to give a little bit more transparency and a little bit more accountability as to why rates have been set.
Pretty well I am done, I think. I lost track 2 minutes ago. Someone else can jump up and have a go. I am out.
Eden FOSTER (Mulgrave) (15:32): How do I follow that? I am very happy to speak in support of this legislation, the Commercial and Industrial Property Tax Reform Bill 2024. This bill is a game changer and transitions the state away from the inefficient stamp duty tax for commercial and industrial properties and instead proposes a more efficient commercial and industrial property tax. Land transfer duty, better known as stamp duty to many people, as it exists right now in Victoria is a tax paid within the first 30 days of purchasing new property, for which the rate you pay is based on the value of the property being bought, with more expensive properties obviously having a higher rate of stamp duty. This means that it is very common for a purchaser to have to cough up tens of thousands of dollars in tax at the same time as they have to pay for a deposit and other expenses that come up when purchasing a new property. To quote Brendan Coates, writing for the Conversation and the Grattan Institute:
Stamp duties on commercial and industrial properties act as a brake on new businesses, stop many businesses from shifting premises as they grow and ultimately mean we don’t use scarce urban land as efficiently as we should.
That is why we are phasing out stamp duty for commercial and industrial properties – because we understand that these inefficiencies are holding us back. Reforming stamp duty has been recommended by numerous inquiries over recent decades, including the Henry tax review, the Productivity Commission and the Grattan Institute. 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. For qualifying properties, 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 from 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.
The commercial and industrial property tax will have administrative features that are similar to existing land tax. Commercial and industrial property tax will be assessed on the land owned as at midnight on 31 December in the calendar year preceding the tax year and site values will be assessed as at 1 January in the calendar year preceding the tax year. Unpaid commercial and industrial property tax will be a first charge on the land and will remain on the land until it is paid, and this is consistent with land tax. Passing on the commercial and industrial property tax through residential agreements will be prohibited. Separately, amendments to the Retail Leases Act 2003 will prohibit the passing through of commercial and industrial property tax to retail tenants covered by that act. Commercial and industrial property tax will be separate from and in addition to existing land taxes.
To help transition from stamp duty, the state government is offering a fixed-rate transition loan that will allow people to pay their stamp duty over a 10-year period instead of in a lump-sum format. 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. This in itself removes a lot of the barriers around stamp duty as it no longer makes it a single lump-sum payment right when a business is trying to invest its resources into expanding or moving premises.
If properties that have entered the reform are subdivided, the child lots will inherit the reform scheme status of the property being subdivided. This will ensure the continuity of the reform and is an integrity measure against property owners using subdivisions to withdraw a property from the reform.
By removing a key barrier to more effective investments, the benefits will multiply across the economy. Removing up-front costs on commercial and industrial property purchases will accelerate business growth and boost jobs, with the cumulative increase in the size of the Victorian economy as a result of this reform being up to $50 billion in net present value terms. To quote Brendan Coates, again in writing for the Conversation and Grattan Institute:
Economists estimate that stamp duties on commercial property cost the economy between 50 cents and 60 cents for every dollar of revenue they raise – more than any other state tax.
It is clear that expert opinion is on the side of the government when it comes to the changes that are being discussed today. Looking just at the change in tax revenue over the budget and forward estimates period, businesses will be paying around $260 million less in stamp duty over the next four years as a result of this reform.
I am proud to represent a diverse range of industrial and commercial industries. Areas such as the Noble Park industrial precinct, the Mulgrave business district and the Springvale activity centre are bustling communities that employ hundreds of residents from the surrounding suburbs. I know that when those businesses are doing well it means the local community is doing well, which means more jobs and better wages for locals. That is why this legislation is incredibly important to my community. It removes barriers for expansion from local businesses and allows for greater flexibility for small businesses. In the last few weeks I have been all over my constituency, talking to small business owners and asking them about their views on the changes to stamp duty and how they will help their business. From cafes in Wheelers Hill to warehouses in Noble Park, businesses across my electorate support these changes and say they would help them grow over the long term.
Recently I visited a business in Mulgrave that is using a small office space. It would ideally like to expand into a bigger space and would really benefit from these changes to stamp duty. This legislation not only benefits established businesses but also paves the way for aspiring entrepreneurs and start-ups. By shifting from a one-time stamp duty payment to an annual commercial and industrial property tax, we are making it easier for new ventures to enter the commercial and industrial landscapes. Imagine the entrepreneur with a revolutionary idea or the mum-and-dad aspiring business owners who want to open up that cafe hesitating at the threshold of launching their business due to the daunting up-front costs of stamp duty. With this reform we are providing them with a more manageable financial environment to make that leap, fostering innovation and economic growth in our community.
I would like to use the final moments of my speaking time to reaffirm my support for this legislation. The Commercial and Industrial Property Tax Reform Bill 2024 will help small businesses across my electorate. It will mean new businesses can establish themselves and existing ones will have greater opportunities to expand. Only the Allan Labor government is fighting for the interests of the people of Mulgrave and beyond, and only the Allan Labor government is declaring that Victoria is open for business. I commend this bill to the house.
Martin CAMERON (Morwell) (15:40): I too rise to talk about the Commercial and Industrial Property Tax Reform Bill 2024. Firstly, I would like to thank the member for Sandringham for his job leading this discussion over the property tax reform. As he said, the reform that wants to come in is on the front of it that we can see. Being a small business owner myself, anything that will ease the burden on small business owners by not having to pay as much in stamp duty is something that I think is a good thing. But maybe there is a little bit of not devil in the detail but uncertainty, like the member for Narracan spoke about just a couple of moments ago before we were all rushed out of the chamber.
I would just like to mention that the Victorian Chamber of Commerce and Industry, the Grattan Institute and the property council are all broadly supportive of removing stamp duty and commercial and industrial transactions. As I said, it is a good thing if we can achieve this. The government in their own estimations have said that there are over 265,000 commercial and industrial properties throughout Victoria, here in Melbourne and obviously spread across regional Victoria, and removing these up-front costs on these types of property purchases will accelerate business growth and boost jobs, and that is what is needed.
We need to promote businesses enticing workers to come in. I know it is a big thing down in my electorate of Morwell; it does not matter if you are working in the commercial industry or in the hospitality industry, right across the board the key issue is enticing people to come and work for you. At one stage probably five or 10 years ago we had ample workers, but now it is very hard to get people motivated to come and work for you, especially if you are in a small business. To take the impost off having to spend your money here and promoting your business and enticing people to come to work for you, as I said, is a really good thing.
Victoria will be the second state in the country to legislate the commercial stamp duty reform, with South Australia doing it back in 2018. When they abolished the stamp duty, that was it – they did not impose a commercial and industrial property tax on their people that own the properties, and it seems to have worked really well. The government say that we are going to have – and I know it is hard because we talk about it now, but it is going to be 2034 before it comes into action – that 1 per cent annual levy that is going to go on into the future, and I notice that in the amendments the Shadow Treasurer, the member for Sandringham, thought that instead of a flat rate of 1 per cent there should be a 0.8 per cent rate for business and commercial properties that are in the city and 0.4 per cent for regional properties, because there is a little bit of disparity between the city and the country. I know we now do have to pay stamp duty; we do get a 50 per cent rebate as such on our stamp duty at the moment. These are things that we need to look at to protect the investors that own these commercial properties. They are mums and dads virtually that have put in their hard-earned money and probably had these properties for a very long time.
As the member for Narracan said, there are properties that do sit there vacant, and we do need to move them on, so hopefully this may be a catalyst to do that. For younger people that are looking to get into commercial business – they may own a business themselves or they might just be trying to buy a commercial property – this might be the trigger moving forward that allows them to be able to do that, but we need to make sure that we have got all the checks and balances up to date.
The government has stated that up to $50 billion in cumulative net present value will be generated over the next 40 years due to this reform, and we hope that is the case. Deloitte conducted the modelling to determine this figure. Their modelling assumes that removing stamp duty will see a greater quantum of property transactions, and as we said before, assuming that this may happen is one thing; seeing that it does happen is 10 years down the track into the future. As I said before, we are not opposing. We do support making it easier on the people that have these properties and on businesses that are actually trying to get themselves up and off the ground.
In the electorate of Morwell we do a lot within the power industry, and with renewables coming on board I think there are opportunities for infrastructure to be bought and sold, and land, to build some big assets on there to be part of the renewable transition. As I said before, small businesses really felt the brunt over the last few years, obviously going through COVID. There are a lot of businesses in the valley and right around regional Victoria, and I am sure here in Melbourne, that are feeling the pinch, that are doing it hard. We really feel for them. I know from my time as a small business owner the bills did not stop coming in; they just continued on every few months. You would have to keep up to pay your end-of-the-month stuff, then we would have all our taxes and everything like that come through.
One of the businesses that I have spoken to recently is Claudia’s Cafe in Morwell. They are really struggling and feeling the pinch. Claudia is in hospitality. She has her coffee shop, and she has her regular clients. But it is coming to the crunch, unfortunately, where it is getting harder and harder at the end of each month for Claudia to make ends meet. She said that she has actually had to go and borrow money to start to pay some of her tax bills or, more to the point, go on payment plans that she has never ever had to before. It does make it really hard for these businesses. We wish them all the best, and we hope that they can get through to the other side and things become a lot easier for them.
As has been mentioned on our side a fair bit, with 53 new taxes that have been invoked across the journey, small business is really, really, really hurting. We can see merit in this bill, but we just want to know what it is going to be like moving forward. Is it going to be not a disaster but an impost on people that are trying to get their businesses up, trying to change commercial properties into the future? Will it be okay, and is this the best option? I know that we have had other people stand in the chamber and say that there is a lag up until this does come in and we see the benefits of it or the hidden gems that we have not foreseen yet. Hopefully, in that journey as we move along we can smooth and sort all those out, which will be excellent.
At the end of the day there are mums and dads that have obviously been in business for a very long time. There are a lot of older people that have been in business, and they might own these commercial properties. As they go to sell them to the up-and-coming generation, which is going to fly the flag and want to keep the dream alive of owning a small business and employing people in that business, that is a good thing. It is a very proud thing you can do, to own a business and actually employ others and give them the opportunity to work and earn money to pay their home loans off and to put their children through school, put a roof over their head and be able to be part of that community.
A lot of small businesses are the backbone of a lot of sporting fraternities and also all the Rotary clubs and Lions clubs around the place. They are the ones that are putting their hands in their pockets, so to be able to streamline this so they can put more money into their businesses is a good thing. As I said, we do not oppose it, but the member for Sandringham has moved reasoned and textual amendments. We commend the bill to the house. We hope that everything it sets out to do, it does. We wish all our small businesses good luck, and we commend the bill to the house.
Tim RICHARDSON (Mordialloc) (15:50): It is great to speak and rise on the Commercial and Industrial Property Tax Reform Bill 2024, an important bill in the context of reforms to stamp duty and support for businesses more broadly. I note the member for Morwell’s comments around the member for Sandringham’s reasoned amendment and will come to that in a moment and the sort of not-opposed position that they take. If you listened to the member for Bulleen or the member for Brighton yesterday on the contribution, you would not know that they are not opposed. It was quite an impassioned plea of ranting awesomeness that they were putting forward. I wanted to address some of those things, particularly around the member for Bulleen’s contribution. He talked about precinct structure plans (PSPs) and so many being approved under those opposite. It made me think of some of the really rushed planning decisions that were made. One particularly comes to mind in the member for Footscray’s electorate, where literally you could have gravel and dirt out the front, multistorey buildings and no activation of community areas, and that was apparently a skyscraper that had been ticked off on and that people have to live in now, and we have to retrofit those outcomes.
When the member for Bulleen was talking about those skyscrapers in the air – ‘It was so wonderful and I approved so many different areas’ – I thought he was on a roll and I had better not interject, but every bit of me was just saying, ‘Is there any awareness of what happened at Fishermans Bend?’ The sirens were going off. Fishermans Bend was literally a rezone quickly done that benefited a lot of significant people who had connections to the coalition, and suddenly we had to go back when we came to government and buy sites for schools, for kinders, for retail support as well and community health services. It is one of the worst planning outcomes that planning will look into in the future and reflect on how not to do development, how not to build new precincts into the future. When the member for Bulleen was reflecting on that, I thought it was a spirited defence of his time as planning minister, but I can say this as well: anyone can colour in on a map, anyone can use multicolours and call that a PSP. The deep thinking comes from what infrastructure needs are required – the roads, the transport outcomes, not just one road in and one road out. Members on our side in government are now dealing with the ramifications of PSPs that were done between 2010 and 2014. We are dealing with the ramifications that are downstream to that and the undoing of developer contributions. It is easy to say you approved all these things, it is another to talk about the actual benefits.
Those opposite have also talked in the context of property and industrial changes and taxation, and in some of the things they have mentioned in taxation they have failed to mention in any of their contributions and speeches that Victoria is the engine room of the nation’s economy. We have created since coming to government well over 700,000 jobs. The recent economic outlook and employment rates just a month and a half ago referenced here had the unemployment rate at 3.9 per cent; when we took government in 2014 we were dealing with 6.7 per cent. We had confidence near its lowest point. No-one was looking to Victoria to invest. It has taken a decade of aspiration and hope. We have seen the Victorian economy substantially grow. Our revenue base when we came to government – the last Napthine–Baillieu budgets were in the $40 billion territory. Our economy has grown. The confidence has lifted up to over a $90 billion budget that the Victorian economy is.
We lead the nation in so many areas, but one is in jobs aspiration and growth and investment attraction when we do not have the levers that other states have. We think of some of the mining states who have such a significant revenue base, the royalties that they can charge and the revenue that they can source. When you package that up, when you look at the delivery that we have provided, the jobs that we have created, the aspiration that has been achieved, it does not stack up to the attacks on where Victoria finds itself. It is okay to try to come up with five or six dot points and try to hold the line, but it falls apart really quickly where you do not have an alternative narrative, you do not have an alternative vision other than where debt has got to or where taxation is. There is no discussion. You cannot have a better budget circumstance by lowering the tax revenue base and then cutting services, which is what the coalition basically puts forward – spend less on services, take lower tax revenue. What is that? That is a substantial deficit for Victorians and a substantial impact. It is literally the same narrative that was put forward by those opposite when we went through the pandemic – literally, ‘Just go budget bottom line. Don’t think about the consequence on services or impacts on Victorians. That’s all we’re worried about. That’s all we’re focused on.’
That is a really poor narrative as we head towards the budget next week. When they do the lock-up and the Shadow Treasurer is there talking about the debt levels, the key questions that need to be put on the record are: what would have been done differently by the coalition during those areas of impact? Would they have cost Victorian jobs, cost Victorian livelihoods and smashed businesses in the commercial and industrial space – from a lower debt base that would have seen communities absolutely smashed during that time? Is that the narrative? Because if the member for Sandringham criticises the interest number right now, then it does not stack up. What, then, are the projects that they would have stopped midstream that were so essential to Victoria’s prosperity and outcomes?
It was not our former Premier Dan Andrews who said that when you are starting or moving through an infrastructure build and going through all of that you cannot stop midstream, and cost escalations are an eastern seaboard pressure. That was not the former Premier Annastacia Palaszczuk – no. That was one of the great Liberal heroes that they had so much hope and aspiration for: Dom Perrottet, the former Liberal Premier of New South Wales who acknowledged the significant cost escalations – and they have had a massive infrastructure program with train tunnels and road tunnels in New South Wales that are now being carried on by the Minns Labor government. When you look at that narrative, you do not see those criticisms from the member for Sandringham stacking up for more than 30 seconds. You cannot be a serious Shadow Treasurer and prospective government without seriously engaging in that policy thinking. You cannot front up and say, ‘Oh, the debt’s at that level.’ ‘What would you have done differently?’ – ‘Oh, it’s all the government’s problem. I don’t actually have an answer today. We’ll do a review.’
‘We’ll do a review’ – that is the best that they have come up with in 10 years of opposition, a broad-based review, which would also see a bill that they are not opposed to under review as well. They are the key things around decision-making. What projects would they have done? What jobs would they have lost? What workers would they have sacked? What meals would they have taken off the table? What essential services in health, in education and early childhood would they have forgone, closed and cut to make sure that they would have a lower debt prism in an environment where we were seeing a one-in-100-year pandemic? If people are not asking those questions, and if the member for Sandringham and Shadow Treasurer’s contributions on bills like this do not do that, then it is just a reheating. It is just a microwave dinner from last year. It is the same empty speech that we had last year over and over again. At least front up and give us something, because there will be a significant policy narrative and discussion from the Treasurer that talks about some of the complexities that we are seeing. Despite some of the geographical challenges that Victoria faces in terms of the revenue it can source, we are the cultural economic capital and sports and arts precinct of Australia. We punch above our weight internationally and we are the jobs and investment capital of the nation, and that is not changing. People will continue to invest in Melbourne and Victoria, and that will continue for many years to come.
It is investments and important policies and tax reforms like this that are a part of that narrative – not the cheap, scoreboard thing that they have tried to run. When a coalition member comes in and quotes the Peter Mitchell interview with the Premier in 2014 again – like a boring, reheated microwave dinner; we hear them go back through that again – you just go, ‘Another one again. A position where they are not opposed.’ They say that this is another tax. What an extraordinary thing. So they are in support of the tax reform but then say it is another example going forward again. It does not really make sense, the position that they have put forward.
The reasoned amendment that the member for Sandringham has put forward is almost just a running shopping list – frustratingly – to put on the record that they are opposed to something that they are actually not opposed to, once again. That some of the empty rhetoric here and some of the things they put forward cannot be quantified or do not have that tangible, deep policy thinking or basis, is written large in that reasoned amendment.
This is a really important bill on the transition, certainly for commercial and industrial precincts and their zonings into the future. Unlike the absolute rubbish that those opposite put forward around investment attraction, we are seeing more industrial estates go up, we are seeing more commercial precincts and we are seeing more investment in Victoria. It is the inverse of their narrative. It does not stack up, what they put forward, and Victoria will continue to be the engine room of our nation.
Steve McGHIE (Melton) (16:00): I rise to contribute to the debate on this very special and interesting piece of legislation, the Commercial and Industrial Property Tax Reform Bill 2024. But before I do, I just want to shout out for a couple of events and a couple of days that have happened this year. I was hoping to get on my feet yesterday, but I just want to remind people that yesterday was May Day, International Workers Day, a day on which we remember the struggles of workers to gain basic rights and rally together to sustain those rights at work and in our communities. It is not just about 8 hours work, 8 hours sleep, 8 hours play; it is also about making sure that people get their rightful entitlements and get paid their rightful money.
There was another special day earlier in the week which I would like to mention, and that was International Workers Memorial Day on Monday. Many members from our side of the chamber attended the fantastic memorial service that the Victorian Trades Hall Council put on in the Carlton Gardens in Melbourne on Monday. Just to remind people, 55 workers have died through work accidents in the last 12 months and many thousands have been injured, so it was a very important day. It was pleasing to be there.
But I will come back to the bill. Following through on our 2023–24 budget promises to abolish stamp duty and replace it with a broad land-based tax directly benefiting our hardworking Victorian business owners and indirectly benefiting our communities in general, this reform is a progressive abolishment of land transfer duty for commercial and industrial properties. I know that many previous speakers have covered this, but this bill introduces a new principal act to bring in the implementation and administration of this reform. It also amends several existing acts to align them with the new tax framework. Those other acts that are affected are the Duties Act 2000, the Treasury Corporation of Victoria Act 1992, the Taxation Administration Act 1997, the Valuation of Land Act 1960, the Heritage Act 2017, the Property Law Act 1958, the Retail Leases Act 2003 and finally the Sale of Land Act 1962.
The impact that these transformative reforms can have will be to the benefit of many thousands of commercial and industrial businesses right across the state but also in my electorate, which is fantastic. Importantly, it will open the door for so many more wishing to set up businesses and shops and things like that within the Melton electorate. I will not spend too much time on the minutiae of the written legislation, but I do want to put forward what this legislation will look like on the ground and in the streets of Melton. It is important not only to debate the merits of the bill but to show what it looks like to Victorians: our businesses expanding or setting up in the best location, somewhere, for example, that is closer to where their customers are – it is like going fishing where the fish are – and establishing a base where there is a growing workforce, like in central Melton. Certainly all the activity is going down in the Cobblebank area, with a new hospital, a new TAFE college, another secondary school and much housing going on, and down in the Exford area of Melton, which is the Melton South area. These are very fast-growing areas, not only with housing and things like that but also with infrastructure.
We are going to have another 50,000 people within the next 5½ years, which will bring it up to 250,000 people, and it is projected that there will be another 200,000 on top of that by 2050, so you can see the growth in that particular area. I know my colleagues in Kororoit, Tarneit and Point Cook are facing the same issues in regard to massive growth and population moving in, which is fantastic. They are so diverse, our communities, and we are so proud of those communities. The transition away from stamp duty makes it easier to establish a base among the fastest growing populations in the country such as mine and some of the other electorates that I mentioned. Of course it is great for the vibrancy of our communities and strengthening the economic vitality of the entire region, in particular right through the western suburbs.
It is estimated that the reforms could create up around 12,600 jobs and will increase Victoria’s economy by around about $50 billion over the next 40 years. Just recently, I think about two weeks ago, we had the Small Business Bus come into Melton, which was fantastic. They have been out there on a number of occasions, and this is just another way that the government helps to stimulate small businesses and foster innovation. It incentivises and, as I say, encourages those Victorians who are willing to have a bit of a go and dip into their own pockets to try and start their own business and get some assistance and learn through the expertise of the people that are on the business bus and to develop their business ideas and build their capabilities, and I have had some direct involvement with that and with some of those businesses that have come from that.
We have what we call a hothouse pop-up in Melton, which is able to share with projects. The project is held once per year. It is fully funded by the Melton City Council for participants who qualify. It is coordinated by an organisation called Venture Melton, which is organised by the council. It is a business network supporting businesses in the mighty City of Melton and a big part of the retail activity, and it centres around strategies to help people within their local businesses. It runs five weeks of intensive training by highly experienced and qualified mentors followed by ongoing development and support from council to help accelerate the process of developing a business. Of course this project, which recently completed its fourth season, has seen something like 105 participants. That is potentially 105 businesses that have been set up through this process, through the expert mentoring, support and ideas for being able to run and formulate a business and hopefully keep a business viable and keep it going, and that is what has happened.
Again I say that these sorts of programs locally are very helpful, and we have contributed to that. I am the chair of the Melton Revitalisation Board, which has provided some money for these pop-up incubators for home businesses to be exposed to the general community of Melton. It has been very successful, and I will give a bit of a shout-out to a couple of those businesses that I went and saw when they were in the incubators. One is called Living KoKo, and they produce coffee and chocolate. It is one business –
Paul Edbrooke interjected.
Steve McGHIE: No, no invite. It was all for me. They are a great business. As I say, they produce coffee and chocolate – a fantastic business. I could not get away from that pop-up. They provide what they call slave-free certified cacao, and it is a vegan product too, which is interesting, especially for someone like me – the taste of it. They get their beans from slave-free Pacific Islanders, and that is great because we are engaging with other countries, our Pacific Island friends. We have a very big Pasifika community in Melton, and these products are just amazing. I encourage people to get onto their website. It is called Living KoKo. Have a look at it and order online. It is just magnificent – both their coffee and their chocolate and what they do for the local community.
But there is another one. There is a young guy that I want to give a shout-out to. His name is Jaslar Pearl. He is a young clothing designer. He is a 20-year-old young man, and his mother taught him how to sew at eight years of age. This guy produces all of these fantastic clothes. But for someone like me, when I went to the pop-up, the only thing I could pick out of his clothing that would suit me was a black T-shirt, so I got some T-shirts. But his clothing is beautiful, and I do encourage people to have a look at his website, called jaslarpearlstore.com. Again, this arises out of support for local businesses, improved tax reform and also the mentoring programs that our government has contributed to for local businesses to try and encourage more productivity within the area.
I know I have only got very little time left, but as I say, this is an important reform. I thank the Treasurer for this legislation and for this tax change. It is really important to businesses across the state and for the productivity of the state. But more importantly for me – I am going to be a bit selfish – it is really important for my electorate of Melton, for the local businesses of Melton, and we keep encouraging those businesses. I commend it to the house.
Anthony CIANFLONE (Pascoe Vale) (16:10): I rise to speak on the Commercial and Industrial Property Tax Reform Bill 2024. This is a bill that is all about abolishing stamp duty on commercial and industrial properties and replacing it with a more efficient annual tax, based on unimproved land value, to be known as the commercial and industrial property tax. At federal, state or local level, the Labor movement has long been committed to a progressive tax system where the burden of taxation aligns with the capacity of corporations, businesses or individuals to pay in a fair and equitable manner.
That is why since 2014 we have been committed to a tax system that is efficient, effective and as balanced as possible, including through the introduction of a number of keynote taxation reforms which, along with this bill before us today, are designed to drive economic and jobs growth and increase the payroll tax threshold to better support small businesses. From 1 July 2024 we are raising the tax-free threshold from $700,000 to $900,000, with a further increase to $1 million in July 2025. This will save 26,000 Victorian businesses up to $14,550 per year, and around 6000 of those businesses will stop paying payroll tax altogether. We are abolishing business insurance duties, becoming the first state in Australia to do so, with the rate of insurance duty on fire and industrial risk, public and product liability, professional indemnity, employers liability and marine and aviation insurance to be reduced by 1 per cent each year from July 2024, saving businesses around $3200 on professional indemnity insurance and $2400 on fire and other special risks over 10 years.
We are also making it easier to start and run a small business in Victoria through our $38 million regulatory reform agenda, which I have previously spoken on, which is all about driving business investment and growth by cutting red tape and streamlining licensing approvals and processes. We have established economic growth in Victoria, led by the commissioner for economic growth, established to drive the next wave of growth-boosting reforms in this state. I would like to take this opportunity to commend the Minister for Small Business for all her passionate and diligent work in this space as well.
Along with these measures, other keynote initiatives we have introduced that will continue supporting economic, business and jobs growth have included the landmark Big Build program, creating game-changing opportunities for local businesses, suppliers, workers and apprentices; free TAFE, providing more than 80 free courses to over 170,000 Victorians in the sectors of skills needs; and of course free kinder for three- and four-year-olds, which will deliver benefits for many, many decades to come. When combined, these measures have all helped to create the positive economic environment to drive record jobs and growth across this state. Since 2014 our economy has generated 800,000 new jobs, including more than 170,000 in regional Victoria. When the pandemic hit our shores in 2020, we invested to protect livelihoods and established a target to create 400,000 jobs by 2025, and we have far exceeded this goal, well ahead of schedule, with employment rising by more than 560,000 workers since September 2020. In my own community of Merri-bek, when we came to government in 2014 unemployment under the Liberals was just over 8 per cent. As of 2023, under this Labor government, unemployment had significantly reduced to just on 3.8 per cent and has consistently had a ‘3’ in front of it.
It is this bill that is currently before us in the house that will continue helping us to drive this investment, business and jobs growth across the state. It is a bill that will reform the taxation landscape for commercial and industrial property in Victoria by moving away from stamp duty and towards a more efficient tax. I am honoured to be part of the very first Victorian government in history with a plan to abolish stamp duty on commercial and industrial properties in this state. Replacing stamp duty on property purchased with a broad-based land tax has long been supported by a wide range of independent think tanks, policy commentators, industry groups and parliamentary inquiries. This is a transformational reform. It is not a simple adjustment to tax settings; it is a different way of taxing commercial and industrial property that will support businesses to grow and expand. It will make it easier for businesses to expand or set up in their best location – for example, closer to their customers or where they want to ascertain a growing and more skilled workforce.
Economic modelling suggests that after 40 years this reform will have added at least 12,600 jobs to the Victorian economy and have increased the size of the Victorian real economy by up to $50 billion in net present value terms – $50 billion. The new tax will apply to commercial and industrial property transactions with both the contract and settlement date on or after 1 July 2024. For these properties stamp duty will be paid one final time on the property if and when it is transacted, and the new annual commercial and industrial property tax will be payable 10 years after the final stamp duty payment regardless of whether that property has been transacted again. If a property is sold again, stamp duty will not apply if the property continues to be used for commercial or industrial purposes. For the smooth transition to the new tax system the government will give purchasers of commercial or industrial property who meet the eligibility criteria the option of accessing a government-facilitated transition loan as an alternative to self-financing the up-front stamp duty amount. In this way eligible purchasers who choose the transition loan option will transition to an annual repayment from the time of the purchase, freeing up capital for businesses that they can use to invest in expanding or employing more workers. The commercial and industrial property tax will also be set at a flat 1 per cent of the property’s unimproved land value rate, with no complicated rate schedules or thresholds. The reform will not apply to a number of ineligible businesses.
Currently when you buy or acquire a commercial or industrial property in Victoria, you pay land transfer duty, also called stamp duty, and stamp duty adds to the cost of purchasing a property. When applied to commercial and industrial properties, it discourages businesses from investing, expanding or relocating their operations, impeding growth in their productivity. Reforming stamp duty has been recommended, as I said, by numerous inquiries, such as from the Henry tax review, the Productivity Commission and even the Grattan Institute. Replacing stamp duty with this commercial and industrial property tax will encourage businesses to expand to a better location, support businesses to invest in buildings and infrastructure and promote the efficient use of commercial and industrial land.
Acting Speaker Lambert, the commercial and industrial sectors, as you can appreciate being the member for Preston, play a vitally important role in supporting economic prosperity across the north, including my municipality of Merri-bek. Many of our local businesses – 16,000 businesses in total – are actually associated with the commercial and industrial sectors and overall, when combined, help generate $7 billion in local gross regional product and help support just under 50,000 locally based jobs. Some of these key commercial and industrial businesses that are based out of my local community include construction businesses, which make up 16 per cent of businesses; professional, scientific and technical services, which make up 14.2 per cent; transport, postal and warehousing businesses, which make up 13.5 per cent; retail traders, making up 7.2 per cent; accommodation and food services, 5.3 per cent; admin and support services, 4.8 per cent; and manufacturing, 3.2 per cent, amongst many others. By removing a key barrier to more effective investments into commercial and industrial sectors via the removal of stamp duty, the benefits will multiply across the economy and across Pascoe Vale, Coburg and Brunswick West. Looking just at the change in tax revenue over the budget and forward estimates period, businesses will be paying around $260 million less in stamp duty over the next four years as a result of this reform. This will help to unlock and encourage more commercial and industrial development across my electorate.
According to North Link, the peak body representing and advocating for the economic and job interests across Melbourne’s north, our region is home to one in five Melburnians. It is on track to rise to 1.5 million local residents by 2036, roughly the size of Adelaide. North Link talks about advocating for and leveraging the strategic opportunities of the north to attract more commercial and industrial investment, given the fact that we are on Melbourne’s CBD doorstop and are the gateway to regional Victoria. There is our proximity to Melbourne Airport, Essendon Airport and even Avalon Airport; our key freeways – the Hume Freeway, the Metropolitan Ring Road, the Calder Freeway, the Eastern Freeway and the future North East Link; our range of local educational institutions – La Trobe Uni national innovation cluster, La Trobe Uni Bundoora precinct, Kangan Batman TAFE in Broadmeadows, Melbourne Polytechnic in Preston, RMIT in Brunswick and much more. We are home to a number of key jobs precincts – CSL in Broadmeadows and Parkville, the Northern Hospital precinct, the Austin Hospital and Parkville health precincts, and the Brunswick Business Incubator. By leveraging these we can help create the jobs of the future.
My community of course is the spiritual home, in many ways, of manufacturing in Melbourne’s north. We were home to the former Kodak factory, Yakka on Lygon Street, Lincoln Mills milliners, one of the biggest milliners in the Southern Hemisphere during its time, and the defence force clothing and textile factory on Gaffney Street. However, today, as set out by North Link:
Coburg activity precinct has great potential to be a major jobs hub for white collar, food and advanced manufacturing, health and creative industries. It includes two distinct zones: Coburg Activity Centre and Coburg North Industrial Areas at both Newlands Road and northwest of Batman Train Station …
which are adjoined by many underutilised parcels of industrial and commercial sites.
Coburg Activity Centre has recently grown as a result of the major investment in the redevelopment of the former Pentridge Prison site. The Bell and Moreland level crossing …
projects and much more.
However, the centre of Coburg remains underutilised and there are substantial Merri-bek City Council landholdings in the precinct that will support future redevelopment and investment.
The Coburg North Newlands Road Industrial Area –
in particular –
is home to a growing food cluster including several medium size enterprises.
These businesses are supported by purpose built industrial accommodation, which provides them with the space and facilities they need to operate …
There is also a strong and growing number of creative and cultural businesses, supporting over 1,000 creative and cultural sector jobs, in the Coburg Activity Precinct.
Overall there is potential for $3.6 billion in economic output per annum and almost 10,000 new jobs to be created in central Coburg if much of this under-utilised commercial and industrial land is maximised into the future. In that respect I genuinely do commend this bill to the house. From my perspective it is very much all about unlocking that potential for central Coburg, which I am sure many of you appreciate I am very passionate about and look forward to pursuing.
That the debate be now adjourned.
Motion agreed to and debate adjourned.
Ordered that debate be adjourned until later this day.