State Taxation Acts Further Amendment Bill 2017

Debate resumed from 21 November; motion of Ms PULFORD (Minister for Agriculture).

Mr RICH-PHILLIPS (South Eastern Metropolitan) (16:37:04) — I am pleased to rise this afternoon to speak to the State Taxation Acts Further Amendment Bill 2017, part of the moving feast we are dealing with through the course of today. In many respects the bill we have before the house this afternoon is very similar to that which we saw earlier this year, because while the bill makes a number of technical amendments in areas such as the Congestion Levy Act 2005, the Duties Act 2000, the Fire Services Property Levy Act 2012, the Payroll Tax Act 2007 and the Taxation Administration Act 1997, most of those amendments are of relatively minor import and are not particularly controversial. In fact with respect to the Payroll Tax Act there are amendments which are supported and welcomed by members of this house and members of the community. But it is in other areas with respect to valuation of land that there are concerns about the direction that this legislation is taking us.

The main provisions of the bill, which as I said amends the Congestion Levy Act, the Duties Act, the Fire Services Property Levy Act, the Land Tax Act 2005, the Payroll Tax Act, the Taxation Administration Act, the Unclaimed Money Act 2008, the Valuation of Land Act 1960 and the Victorian Civil and Administrative Tribunal Act 1998, are with respect to the valuation of land functions. They will be centralised with the valuer-general away from local government, with land to be valued annually rather than biannually, as is the present situation.

The changes to the Land Tax Act relate to an absentee owner surcharge to provide similar tax exemptions for trusts where beneficiaries are absentees as for corporations where owners are absentees; also with respect to the Land Tax Act, the changes relate to closing loopholes used by land banking developers who could lease land for a peppercorn rent for a charitable purpose to avoid land tax. With respect to the Payroll Tax Act, the bill extends an exemption for apprentices and trainees who are engaged by a for-profit group training organisation so that they are treated the same as when engaged by a not-for-profit group training organisation.

There are technical changes with respect to the Congestion Levy Act, and they relate to confirming exemptions for Melbourne Zoo and to clarify provisions with respect to exemptions for parking spaces used by shiftworkers. There are administrative changes in sections of the Taxation Administration Act, particularly in relation to the receipt of documents, given the change in the way Australia Post now offers postal services, with the shift from next-day delivery to within seven business days. That has necessitated a change in taxation administration so that documents that are posted to the State Revenue Office are received within statutory time frames. That is just a minor administrative change.

The bill is largely administrative in nature, with the exemption of the valuation provisions. On the valuation provisions, it is largely deja vu. When the Treasurer brought his budget down earlier this year it was with the expectation with the then State Taxation Acts Amendment Bill 2017 to put in place a regime which would allow for land tax assessments and valuations to be done on an annual basis rather than every two years. The reason for this was to ensure that increases in valuations of land were picked up more frequently and came into play in the land tax assessment regime more frequently than is the case with the assessments being done every two years.

The second provision was to take the responsibility for valuation of land — which is currently undertaken by local government for rating purposes and in some instances is undertaken by local government valuers and in other instances is undertaken by contract valuers but on behalf of the local government authority — out of the hands of local government authorities and put it in the hands of the valuer-general. At the time those provisions came through with the State Taxation Acts Amendment Bill back in May in association with the budget, they were strongly opposed by local government. As that bill progressed through the Council at that point in time the government backed away from those proposals. It knew it could not get that bill through this house with those provisions in it, and it did not proceed at that time with those provisions.

There was extensive commentary at the time from the Municipal Association of Victoria (MAV) and from a number of councils strongly opposing the centralisation of the valuation functions. They were opposed for a number of reasons. Firstly, for councils which employ valuation staff there was the fact that those staff would lose their employment, which obviously was a fundamental concern of those councils. Likewise there was the cost impost associated with the shift from local valuation to valuation by the valuer-general. I might add that the issue of employment extended to contract valuers as much as it did to on-staff valuers — the fact that local valuers that had been engaged by councils would also potentially lose that function as the official responsibility transferred to the valuer-general. So that was equally applicable to those council officers.

There was also concern about the inherent conflict of interest with Valuer-General Victoria as a government agency undertaking valuations for the purposes of land tax assessment. It is in the interests of the government that land valuations are high because land tax is imposed on a progressive scale and, as those people who pay land tax can attest, as valuations have increased — as they obviously have done certainly in the last decade, with the rapid escalation of property prices in Victoria — the very steep, progressive nature of the land tax scale has meant that land tax receipts have increased enormously. Many business owners who hold property for investment purposes know of properties that have increased in value from maybe half a million dollars or three-quarters of a million dollars to maybe a million or a million and a half, as has not been at all unusual in the Melbourne property market over the last 10 or 15 years. The increase in land tax has been multiples of the original amount.

So land tax has been incredibly lucrative for the government over the last decade to 15 years, and therefore there is an incentive for government in taking on that valuation of land function through the valuer-general to ensure that those valuations are high and continue to increase. This of course is a complete conflict of interest. Where the revenue base of the state through the land tax is dependent on those valuations, to have the state undertaking those valuations is an inherent conflict of interest.

That is one of the issues that was raised as a concern by local government. It is fair to say that that situation does not occur with local government now. They establish their budgets on a nominal dollar basis and then strike a rate, a cents-in-the-dollar rate, against the total value of property in their municipality, but the actual valuation of land is not a driver for local government. As the aggregate valuation of land in a municipality changes, they simply strike a different rate having regard to their budgetary needs. So with the valuations that are undertaken by local government, either through on-staff or contract valuers, there is not the conflict of interest in those valuations being undertaken in the way that will be created with the shift of responsibility for valuations to the valuer-general.

The coalition's view is that nothing has changed since this bill came forward in May. They were bad provisions back in May when they were first proposed by the Treasurer and they remain bad provisions. The centralisation of valuation is flawed for the reason of the conflict of interest. The shift from two-yearly valuations to annual valuations introduces an inefficiency into the valuation process and is seen in the community for what it is: a one-off revenue grab. To bring forward revenue from a two-year cycle to a one-year cycle is simply a short-term revenue grab for the state in order to take advantage of what has been a rising property market. We believe that those provisions are not acceptable. No case has been made by the Treasurer as to why these provisions should be supported.

I note that since the provisions were rejected by this place back in May–June and the government withdrew those provisions before passing the state tax bill, the Treasurer has further engaged with local government and has had some success in persuading some bodies like the MAV to reduce its opposition to these provisions. But I know that we still have many constituent councils who do oppose these provisions — who opposed them back when they were first introduced and continue to oppose them for the same reasons. So while the peak body may have been neutered in its opposition, there continues to be opposition from individual local government authorities, and we believe that opposition merits the consideration of this house.

It is our intention when the bill proceeds into committee, if the bill proceeds into committee today, to seek to omit the valuation provisions of this bill. The bill is largely about the valuation changes that the Treasurer could not achieve earlier this year. The key part of the bill which will be the subject of the coalition's amendments is part 9 of the bill, which extends from clause 37 to 82, with the consequential amendments, and it is our intention that these clauses be omitted.

We believe that the other provisions of the bill are reasonable. The provisions with respect to payroll tax are reasonable; however, we will not be supporting the valuation provisions, and when the bill proceeds to the committee stage we will be seeking the omission of those clauses and the omission of those provisions. On the basis of exploring those in consideration in committee, we will then consider our final position on the legislation.
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