Thursday, 30 November 2023

State Taxation Acts and Other Acts Amendment Bill 2023

Second reading

Debate resumed on motion of Jaclyn Symes:

That the bill be now read a second time.

And Evan Mulholland’s amendment:

That all the words after ‘That’ be omitted and replaced with ‘this bill be withdrawn and redrafted to:

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

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

John BERGER (Southern Metropolitan) (11:47): I rise today to speak on the State Taxation Acts and Other Acts Amendment Bill 2023. This is another bill in a long line of tax reforms to update our state revenue system. This is to ensure that every tax held in Victoria is fit for purpose and delivering for Victorians. This bill amends several acts. Expanding the provisions of the Land Tax Act 2005 is going to encourage the owners of hundreds of unoccupied homes in Melbourne’s outer areas and regions to make these places available. Under the amended act the period that properties can be deemed vacant will start on 1 January 2024, with the tax changes commencing in 2025. Existing exemptions will continue to apply statewide, including for holiday homes, properties recently acquired or regularly occupied for work purposes and properties being built or renovated. As has been reported this week and many in this chamber will know, we are going to be introducing amendments to make the vacant residential land tax (VRLT) more effective at boosting housing supply by increasing the rate to 2 per cent, and 3 per cent for properties that remain vacant for consecutive years.

This bill is making changes to a variety of different pieces of legislation. This includes the Duties Act ‍2000, the First Home Owner Grant and Home Buyer Schemes Act 2000, the Land Tax Act 2005, the Local Government Act 1989, the Valuation of Land Act 1960, the Property Law Act 1958, the Sale of Land Act 1962, the Windfall Gains Tax Act 2021 and the Treasury Corporation of Victoria Act ‍1992 – a mouthful, I know, but these reforms and amendments are essential to our work going forward and I am happy to endorse them.

These various amendments will be for a far fairer system and a more effective taxation system in Victoria which helps those who need it the most right now. State revenue is key to financing our numerous services and crucial infrastructure projects. It is essential to funding our hospitals and key to keeping schools open. Beyond that our state taxation system and other services provided by that revenue help those struggling to get ahead and shape what our state looks like.

Getting the balance right is important, and the Allan Labor government is committed to building a fairer tax system for all Victorians. We want to make sure that we are helping those doing it toughest and make it clear that they can always trust this government to have their back. In times of economic prosperity and times that are a little tougher on the hip pocket, the Labor government is always swift to address people’s needs to ensure the Victorian public service are delivering for Victorians and ensuring their money is spent wisely. We also want to make sure that our tax system is shaped in a manner that encourages positive development going forward and that our next generation inherits a Victoria that is fairer and more prosperous, and I know the Allan Labor government is committed to doing this.

We know the housing crisis is real, and we are dealing with it. Our actions will bring long-term, strong and meaningful change to our housing market. We have had the opportunity to bring about nation-leading reforms and we have not wasted it, ushering in a new era for housing in this state through substantial reforms and amendments which will help with pressures on the housing and rental markets. This government believes in Australia’s dream, and we believe it is our responsibility to do everything that we can to help Victorians achieve that dream and keep the dream. This government’s commitment to housing is undeniable. Just a few months ago the former Premier Daniel Andrews announced the Victorian government’s housing statement, which included a commitment to building 800,000 new homes. This is the most ambitious housing program that the state and for that matter this country has ever seen, and no matter what the naysayers think, it will forever change Victoria for the better.

Victorians living in public housing deserve more than towers that do not even meet basic building standards. That is why a key aspect of this bill explores how we can help address the housing crisis through incentivising landowners. In Victoria we have a tax on vacant residential land. Any residential land that is not occupied by either the owner or the tenant for more than six months in any given year will be taxed around 1 per cent of the capital improved value. This tax is distinct from other taxes that apply to vacant land and properties at both state and federal levels, and it makes sense. Vacant land should not be left to collect dust on the shelf. It should be used to contribute to the economy instead of sitting around empty with no plans, and as our population grows and the housing crisis worsens, vacant land is a massive waste.

At this stage the tax does not extend to unimproved land, which is defined as residential land without a residence on it. With the intent of incentivising landowners to improve land and therefore increase the housing supply, this tax will expand and encompass unimproved land. From 1 January 2026 residential land undeveloped for more than five years in an established area of Melbourne – so since 2021 – will become liable for a VRLT, applying to an estimated 3000 undeveloped properties. Once construction commences a further two years are provided before the tax applies, and the State Revenue Office commissioner can extend this in some circumstances. Increasing housing supply is key to tackling the housing crisis, and vacant unimproved land stands in the way. It is like it is gathering dust. It is not a good policy, and I think it is about time this changed.

The inclusion of unimproved land in the tax will apply to property that has been left unimproved, without any sign of construction for five years or more. Changes will expand the VRLT to residential land undeveloped for more than five years in established areas of Melbourne to discourage long-term land banking and spur the development of new housing across thousands of sites in high-demand areas. This will close the loopholes where the VRLT did not apply to unimproved land, enabling this valuable land to slip through the cracks despite being appropriate for residential development. This is to distinguish between land that will likely be left unimproved indefinitely and land that the owners are in the process of planning to build on. It is very reasonable to amend our tax system to reflect the urgency of increasing our housing supply and the wasteful nature of vacant spaces. A similar provision already exists that reflects these facts.

At this stage in Victoria if a residence is left vacant due to building or renovations for more than two years, the owner of that residence will be taxed. Of course there are exemptions that will apply to vacant land to ensure that landowners are not unfairly taxed. These include land that is not able to be improved or built on for reasons outside the owner’s control or land that borders the perimeters of the owner’s primary residence, where it is unlikely that this land will be utilised anyway. The government expects that this will have the biggest effect on metropolitan areas and the supply and cost of housing in metropolitan Melbourne, an area where it is needed.

As I said earlier, the tax amendment is very reasonable. There is no reason for a lot of land to be left vacant or not used for what it is zoned for. It is not our intention to punish ordinary landowners by surprise. We want this to be fair and just for the common good, and I think these amendments will do just that.

The bill also amends the Windfall Gains Tax Act in Victoria to expand and broaden the circumstances in which obvious or technical errors lead to land being rezoned to correct for planning errors. The Windfall Gains Tax Act 2021 holds implicit policy to exempt rezonings for the purposes of planning corrections and that that should not result in owners being dealt a windfall gains tax liability. However, the existing exemptions fall short of ensuring that the principle is employed across all corrective rezonings. Currently the exemptions only apply to corrections to planning schemes made by the Minister for Planning. Under this bill exemptions will be given to properties that the commissioner determines satisfy the requirements to be correcting a planning error. This means that corrections not made by the minister – for example, a council-made rezoning for the purpose of correction – will be eligible for a windfall gains tax liability waiver. The amendments are about ensuring that this bill is precise, and while altering some of the settings, will make it fairer and reasonable.

The bill prohibits the apportionment of land tax between the vendor and the purchaser under a contract of sale and makes it an offence to pass on the vendor’s land tax liability to the purchaser under the contract. What does that mean in reality? It means that if we are going to protect purchasers, as has been reported this week, in response to the consultation with industry, the government will be moving amendments so that property purchases of more than $10 million will be excluded from this prohibition on the basis that more sophisticated purchasers are not in need of such protection and this may be for the reason that flexibility in contracting is to the benefit of both parties to such transactions. In addition to the prohibition on land tax apportionment, the government made a commitment at the time of introducing the windfall gains tax that consumers would not pay it. That is why the government will also put beyond doubt whether it can be apportioned to the purchaser.

I want to conclude this speech by saying that the bill reflects the need to update and improve our state tax revenue system to be fit for purpose for the 2020s and into the future. Beyond the services and infrastructure, the state taxation system builds the financials by which our great state can fund the many operations and mechanisms to help shape what Victoria looks like not just today, not just tomorrow but for several years going forward. The reality is we need to act. We are not going to pass the burden on to our children or our grandchildren. For some of us in this chamber, I hope this happens soon. In 20 to 25 years time you would not want to have to tell your kids that we had the opportunity to help future generations but we did not.

800,000 homes is a big target. It is ambitious to say the least, but I believe it is right for the state. Many social housing projects and initiatives are already underway in Victoria. We are just beginning. We need to take substantial pressure off our housing market to stop the upward spiral. These amendments are part of the vision. We can now encourage construction and development on undeveloped and unused land. It is part of the holistic vision for the state. We are providing and building infrastructure into the future to ensure that homes are built, that you can get them and you can resource what you need.

To that end, we can look to the future and removing 72 level crossings which are encroaching on Melbourne’s roads and rail lines and just slowing them down. The Suburban Rail Loop is going to fundamentally change how we live and how we get around the suburbs. I commend the bill to the house.

Business interrupted pursuant to standing orders.