2016-11-10
MR BARBER (Northern Metropolitan) — As noted, the bill makes a number of small and technical changes to a number of acts, but the bit that has got the Liberal Party excited is the changes to the growth areas infrastructure charge, which is are currently contained within the Planning and Environment Act 1987 and proposed to be amended by this bill.
Back in 2010 both the Labor and Liberal parties were contemplating massive expansion of Melbourne at its urban fringe — a deliberate, calculated policy of urban sprawl — because at the time they believed that the solution to rising housing prices was going to be to create more urban sprawl at the fringes of our cities. Things have changed somewhat since then, and now there is a broad recognition that federal taxation settings as they relate to housing are what have been driving up housing prices. When you consider how much faster housing prices have grown than incomes and extend those two graphs over a period of 20 years or more, which is what has been happening, no wonder it is a simple mathematical calculation that housing becomes unaffordable to those who do not currently have a foot on the escalator — that is, own some housing themselves. It should not be any shock that housing has suddenly got to the point where it is out of reach for new entrants on ordinary incomes. By simply looking back a few years you can see how those two things, income versus the asset of housing, have been growing.
There has been some belated recognition from the Labor Party and a decision that maybe they want to start working on some of those federal tax settings — only after the Greens stuck their head above the parapet and proposed changes in the run-up to the federal election. That then caused the Labor Party to move with some more modest proposals of their own. Suddenly I was reading every day that Labor have proposals for changes to negative gearing, with the row having been well and truly hoed for them by the Greens party.
Recently the federal Treasurer, Scott Morrison, has weighed into the debate. He has decided that he has got the solution to housing affordability. Surprise, surprise! His solution is to tell the states to do their job better. Thank you for that incredible act of insight and bravery, Treasurer Morrison. You will do absolutely bugger-all yourself, but you will lecture other jurisdictions about what they ought to do. What is it that they ought to do? 'Release more land', he says.
Let us get down to the heart of the issue or the matter as it relates now to state taxation. We have taxation on housing and other land-based assets in Victoria. We have land tax on certain numbers of them, we have stamp duty on the transfer of houses and we have this modest collection of money from the growth areas infrastructure charge that in no way goes to covering the cost of developing that infrastructure out on greenfield sites, which is enormously expensive. Housing might be cheap out there relative to other areas — a hundred grand for the land and a hundred and something grand for the house — but add to that the cost of that public infrastructure and, depending on what you might count as part of that, it is a hundred grand or another hundred grand on top of that of public subsidy to develop that particular model of housing, which is the urban sprawl model. Tony Abbott in another context might have talked about subsidising certain people's lifestyle choices. The small, modest growth areas infrastructure charge goes nowhere near covering the full cost of an urban sprawl model of housing.
What that means in practice is that anybody purchasing housing and paying stamp duty on the transfer of that housing is in fact cross-subsidising outer fringe housing. That is what is going on here. If a certain amount of tax revenue is to be collected from the property-based taxes in Victoria, then less growth areas infrastructure contribution (GAIC) collected simply puts the burden onto stamp duty payers, other housing entrants and other forms of state taxation.
So not surprisingly a property investor decided it was cheaper to get some lawyers and go to court and challenge the tax bill than to pay the tax bill — and they were successful. Hence the changes that are proposed here today. The Property Council of Australia have never liked the growth areas infrastructure charge. They have always opposed it. However, as it is simply another form of property or housing taxation, you would think the property council would be campaigning to move those taxes off housing or at least off housing transactions. But really they have minor gripes with stamp duty. They have a major gripe, apparently, with the growth areas infrastructure charge.
By the way, that tax was introduced in 2010, and then we had a new government come in sometime afterwards. Then the money just sort of started piling up. It kept piling up into the designated funds into which it was put. Half the money goes into a transport fund that is to be spent in growth areas, and half the money goes into a community facilities fund, also designated to be spent only in those growth areas. Very little money has actually ever been spent out of those funds. The money that came out of the transport fund was spent on roads, and the money that came out of the community facilities fund was spent on roads. But mostly it has just been piling up because the Liberal government were in charge of it and, as we all famously know, they really could not get their act together with a program of works. So they just piled it up and presumably rolled around in it like Scrooge McDuck and enjoyed how much they had added to the surplus of the state. In the meantime there are communities on the urban fringe just crying out for infrastructure, while the money is piling up in this fund.
By the way, one of the things that the fund can be used for is the operating costs of new public transport for the first three years after that public transport is first implemented, which means you could in fact use money out of the GAIC funds to run new bus services and pay the operating costs of those bus services for the first three years. There are communities out there that are just absolutely crying out for a bus to get them from their home to their shopping centre, or maybe even to the nearest railway station down the road so that they can then commute further inwards for a job.
There has been very little action from the Liberal Party on that, and we might try to find out in the committee stage if there is an update on the current balances of those two funds, because we only get to read about it once a year when it is published in a departmental annual report, and I do not believe that particular report has been published just yet. There are no surprises whatsoever that the property council is opposing changes to the GAIC. There are no surprises whatsoever that the Liberals are running along behind them.
There is a bit of a semantic dispute going on here in terms of the changes that are being made. If I understood Mr Rich-Phillips's argument, he says that the bill does not close a loophole but in fact targets what were two previous — I could call them GAIC-able — GAIC-trigger excluded events. No doubt we will get some information from the minister on this during the committee stage. One of those is under section 201RF, where the purpose of the subdivision is solely to create a lot for a utility installation. The bill, as I understand it, deletes that excluded event. The other one is where the purpose of the subdivision is solely to provide land for transport infrastructure or any other public purpose. This is also to be removed as an excluded event, meaning that event will trigger GAIC.
There are a number of steps along the journey when GAIC liability might be triggered. It is not just right at the end when the houses are finally built and handed over; there are a number of steps in the process. When we first introduced the GAIC there was quite a bit of argument around when it should be triggered. The Labor government was very worried actually about it being triggered towards the end, because they thought that that somehow meant it would feed directly into the price of a house. They were arguing for a much earlier triggering, often during the subdivision stage, or even earlier at the sale or resale of land when it was still in its bulk stage, but I think we have well and truly moved on from that argument.
The other bits that are being changed — and I am not sure if there is a particular objection to this — are paragraphs (e), (f) and (g), where the current exclusion is going to be changed just slightly to say that it is only when the subdivision is solely to realign the common boundary, rather than, as it says now, the subdivision is to realign the common boundary, and so on through paragraphs (e), (f) and (g). I am not particularly sure whether it is that bit that Mr Rich-Phillips is concerned about.
The point is that when you step back and take a helicopter view of this, the state is going to collect a certain amount of tax to meet its needs. The state already extensively collects taxes from property through land tax, through stamp duty on the sale of land and in a very modest way from growth area activities. In my view we should weight the tax mix more towards taxing the bads, that is the urban sprawl, and less towards the goods, that is the transfer of property. There is a huge deadweight loss occurring to the economy as a result of our heavy stamp duties. Not only are the state taxes that still exist incredibly distorting and in many cases quite inequitable, but Victoria is said to have the worst mix of any state. What I see here, at least from the Liberal Party today, is absolutely no appetite to change that mix at all. They would rather we collect less GAIC and inevitably then end up collecting more stamp duty and other sorts of taxes.
If we are doing anything here today, we ought to be shifting more of the burden of the cost of infrastructure for urban sprawl onto the process of urban sprawl, if that means that somewhere else we acquire less tax or have more revenue available for other pressing infrastructure needs. For that reason I am not inclined to support the Liberals' amendments. I think they have a technical argument that they are presenting. What they are not presenting is an overall argument of equity or efficiency.
Despite the number and complexity of different events that trigger GAIC, the fact is the money is being collected through this taxation system with a fair degree of efficiency. In fact it is the efficiency with which it is being collected that has caused someone to start bucking and go off to court. They found it more worthwhile to try to avoid the tax through a court proceeding than to pay the tax.
It is not like this is the first time this has ever happened. In fact it is happening every day out there in taxation land, state and federal. There is a constant attempt by people to use interpretations of the act to avoid tax. There is an entire industry associated with avoiding tax by going to court. I have never seen any of that action myself, but I do not know about other members in this place. My point is that there are no surprises there. There are people out there who would rather spend money on lawyers than spend money paying their tax bill, and it is run of the mill that a Parliament would receive a bill that attempts to close some of those loopholes, and for that reason the Greens will be supporting the bill.
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