Hansard debates

Danny PEARSON (Essendon – Minister for Transport Infrastructure, Minister for the Suburban Rail Loop, Assistant Treasurer, Minister for WorkSafe and the TAC) (16:34): I move:

That the amendments be agreed to and the following amendments be made to the bill:

1. Insert the following New Clauses to follow Clause 27 –

‘27A What is the rate of land tax?

For section 35(3) of the Land Tax Act 2005 substitute –

“(3) Subject to section 88EB, the rate of vacant residential land tax is –

(a) if the land was not liable for vacant residential land tax in the preceding tax year – 1%; or

(b) if the land was liable for vacant residential land tax in the preceding tax year but not the tax year preceding that tax year – 2%; or

(c) if the land was liable for vacant residential land tax in the last 2 preceding tax years – 3%.

Note

For the purposes of the vacant residential land tax, the taxable value of the land is the capital improved value of the land as at the relevant date – see section 19(1A).”.

27B Holiday home exemption

For section 88A(1)(a) of the Land Tax Act 2005 substitute –

“(a) in the year preceding the tax year –

(i) the owner of the land or a vested beneficiary of a trust to which the land is subject used and occupied other land in Australia as a principal place of residence; and

(ii) the owner of the land or a vested beneficiary of a trust to which the land is subject, or a relative of the owner or vested beneficiary, used and occupied the land as a holiday home for a period of at least 4 weeks (whether continuous or aggregate); and”.’.

2. Insert the following New Clause to follow Clause 28 –

‘28A New sections 88EA to 88EC inserted

After section 88E of the Land Tax Act 2005 insert –

“88EA Land becomes residential land during third year preceding tax year and has not been used or occupied or changed ownership

(1) Land is exempt from vacant residential land tax for a tax year if –

(a) at the commencement of the third year preceding the tax year the land was not residential land within the meaning of section 34B(1); and

(b) during the third year preceding the tax year the land becomes residential land within the meaning of section 34B(1); and

(c) during the second year preceding the tax year the land is exempt from vacant residential land tax under section 88D; and

(d) during the year immediately preceding the tax year the land is exempt from vacant residential land tax under section 88E; and

(e) for the period from which the land becomes residential land within the meaning of section 34B(1) up to the tax year –

(i) the land has not been used or occupied; and

(ii) the land has not changed ownership; and

(f) the Commissioner is satisfied that during the period referred to in paragraph (e) the owner of the land made genuine attempts to sell the land at or below the price that they expected to receive when construction commenced on the land.

(2) To obtain an exemption from vacant residential land tax under this section, the owner of the land must –

(a) apply to the Commissioner for the exemption on or before 15 January of the tax year; and

(b) give the Commissioner any information the Commissioner requests for the purpose of enabling the Commissioner to determine whether the land is exempt from vacant residential land tax under this section.

88EB Residential land that has not been used or occupied or changed ownership for more than 3 years

(1) Land is eligible for a concessional rate of vacant residential land tax of 1% for a tax year if –

(a) in a preceding tax year, the land becomes residential land within the meaning of section 34B(1); and

(b) in a tax year after the tax year referred to in paragraph (a) but preceding the tax year, the land is exempt from land tax under section 88EA; and

(c) for the period from which the land becomes residential land within the meaning of section 34B(1) up to the tax year –

(i) the land has not been used or occupied; and

(ii) the land has not changed ownership.

88EC Publication of report on exemptions and concession

(1) The Commissioner must publish on the Commissioner’s website an annual report of the following information for the 12 month period to which the report relates –

(a) for each postcode in Victoria, the number of –

(i) exemptions granted under each of sections 88D, 88E and 88EA; and

(ii) concessions granted under section 88EB;

(b) the total amount of vacant residential land tax that was not payable because of the grant of the exemptions and the concessions referred to in paragraph (a).”.’.

3. Clause 30, line 15, omit “the commencement day, the land is” and insert “31 December 2023 the land was”.

4. Clause 30, line 27, omit “the commencement day, the land is” and insert “31 December 2023 the land was”.

5. Clause 30, line 33, omit “2023;” and insert ‘2023.”.’.

6. Clause 30, page 24, lines 1 to 3, omit all words and expressions on those lines.

7. Insert the following New Clause to follow Clause 34 –

‘34A What is the rate of land tax?

For section 35(3)(a), (b) and (c) of the Land Tax Act 2005 substitute –

“(a) for residential land within the meaning of section 34B(2B) – 1%; or

(b) for any other land –

(i) if the land was not liable for vacant residential land tax in the preceding tax year – 1%; or

(ii) if the land was liable for vacant residential land tax in the preceding tax year but not the tax year preceding that tax year – 2%; or

(iii) if the land was liable for vacant residential land tax in the last 2 preceding tax years – 3%.”.’.

For the benefit of the house I would like to provide a brief explanation of the proposed amendments. The vacant residential land tax – variable rate: this will make more properties available for people to live in. We are making changes to the vacant residential land tax (VRLT) rate so that dwellings that are vacant for multiple consecutive years pay a higher rate. Existing dwellings that are vacant for one year will still pay 1 per cent of capital improved value, those vacant for two consecutive years will pay 2 per cent and those vacant for three or more consecutive years will pay 3 per cent.

The vacant residential land tax – compliance: the government will establish a VRLT compliance trial in 2024 involving apartment towers and in 2025 involving inner and middle suburbs of Melbourne. The State Revenue Office (SRO) will use existing capabilities and compliance tools to identify properties that appear vacant and then seek further information from property owners to establish whether they are liable for the VRLT. The results of these trials will be provided by the State Revenue Office to the government in 2025 and subsequently published.

The vacant residential land tax – vacant land: the bill expands the vacant residential land tax to also apply to unimproved residential land that has been undeveloped for more than five years in established areas of Melbourne to discourage land banking and encourage new housing developments. We are making additional changes to allow the government to issue guidance and set out the factors that the commissioner of state revenue should take into account in determining whether there are legitimate reasons why vacant land has been vacant for more than five years and housing has not yet been built and therefore is not liable for the vacant residential land tax.

Vacant residential land tax – new dwellings: under existing vacant residential land tax exemptions, new dwellings that remain unsold can get an exemption from the VRLT for up to two years. To ensure that new residential developments are not discouraged, we are making changes so that owners of new dwellings can apply for a third exempt year from VRLT if it can be shown that the owner has made genuine attempts to sell at or below the price they expected to receive when they began construction. They must also apply for the exemption by 15 January the following year. If these properties remain unsold and vacant after that time, the VRLT will be calculated at a rate of 1 per cent until it is sold. To provide greater transparency, the government will publish figures each year on the number and value of properties receiving these exemptions.

The vacant residential land tax – holiday homes exemption: the exemption from VRLT for holiday homes used by owners for more than four weeks each year will be extended to include use by immediate family members. The government has also committed to extending the holiday homes exemption to include properties held in a trust or company as of 28 November 2023, when this change was made public.

Renewable energy: an amendment in the original bill would reinstate the long-held practice overturned in a 2021 court decision that fixtures should be included in calculation of a property’s capital improved value. This would have led to wind and solar farms and commercial battery storage facilities paying significantly more in fire services property levy than they do currently. We are making amendments so that wind and solar farms and commercial battery storage facilities pay the public benefit rate for the fire services property levy rather than the much higher industrial rate. In doing so our government is again demonstrating its commitment to a renewable energy future to encourage Victoria’s continued leadership in renewable energy. The government will also include commercial battery storage facilities in the payment in lieu of rates scheme that already applies to electricity generators, including wind and solar farms, with this change to be worked through in the first half of 2024.

Section 94 of the Electricity Industry Act 2000 allows electricity generators to seek to pay an amount in lieu of local council rates under the payment in lieu of rates scheme. The Electricity Industry Act does not account for battery storage technologies, which are relatively new and not strictly defined as generators. However, storage will play an increasingly important role in supporting renewable generation. So as to ensure consistency, we will include batteries in the pilot scheme.

Other amendments: the bill prohibits the apportionment of land tax as a consumer protection measure. After further consultation, we are moving an amendment to provide an exemption from this rule for property purchases of $10 million and greater on the basis that purchases of property above this figure do not require this protection and that there may be specific reasons why additional flexibility in contracting is of benefit to both parties to such transactions. The start date for the banning of land tax apportionment has been clarified to be 1 January 2024. We are also amending the transitional provisions for uninhabitable properties and properties under construction in the expanded area to clarify that the transitional provisions only apply to lands that were under construction or uninhabitable as of 31 December 2023.

I might wrap up my contribution there. I do want to acknowledge the hard work of the Treasurer in relation to getting us this far. I want to thank him, I want to thank his office and I want to thank officials for all their work in getting this important piece of legislation back to the Parliament.