Wednesday, 22 February 2023
Committees
Economy and Infrastructure Committee
Economy and Infrastructure Committee
Reference
David LIMBRICK (South-Eastern Metropolitan) (11:34): I move:
That this house requires the Economy and Infrastructure Committee to inquire into, consider and report, within six months of the house agreeing to this resolution, on issues around land transfer duty fees and its instruments within the Duties Act 2000, including but not limited to:
(1) analysing the current situation regarding the land transfer duty tax, and reviewing:
(a) impacts on labour and capital mobility;
(b) revenue predictability;
(c) efficiency of resource allocation;
(d) effects on housing supply and development;
(e) overall tax efficiency;
(2) examining potential alternatives to land transfer duty, assessing models from interstate and international jurisdictions, noting the pros and cons of various proposed or implemented solutions; and
(3) any other related matters.
Australians are now being divided into new classes of people who could be described as people whose family own their house and people who do not, and as house prices go up the gap widens. At every election now, federal or state, there is a lot said about housing affordability, homelessness and inequality. There is going to be a lot more said about it as interest rates rise and as international students and backpackers return to Australia. But today I will concentrate on the issue of taxes and particularly land taxes.
Tax reform is something that is really important but does not grab the public attention like many social issues do. When talking about tax, many people use phrases like, ‘Tax is the price we pay for living in a civilised society.’ Whilst it is true that taxes generate revenue that funds services valued by many people in society, the Liberal Democrats are a libertarian party, so we look at tax through a different lens. Another way to consider tax is the confiscation of other people’s property. People do not have much choice about paying taxes – they are compulsory – so the expectation should be that this confiscated wealth is used efficiently. When we consider efficiency, stamp duty is frequently referred to as the worst tax. It was over a decade ago that the Henry review recommended abolishing stamp duty, amongst other property tax reforms. The Productivity Commission has recommended abolishing stamp duty also. Even in this chamber, when my colleague Mr Quilty asked about abolishing stamp duty, former Minister Jennings acknowledged that it is a problematic tax but noted that tax reform is a very challenging prospect for government, and on that point I agree.
The aim of this motion is to get the wheels moving so that something can be done about it. There are two main ways governments can make housing affordable. One is to ease land restrictions, and the other is to stop slugging people with tens of thousands of dollars of fees every time they buy a property. Stamp duties are a massive hurdle for people who want to get into the housing market. Someone buying a house in Melbourne at the median price of $746,000 will pay nearly $40,000 in stamp duty, and every time they raise a bid the stamp duty goes up also. The mortgage payments that are inflated by these taxes over many years cannot be spent on other things, like clothes, newer and safer cars, children’s education or charity.
The federal Treasury has estimated that every dollar of stamp duty revenue raised by governments does 72 cents of harm to the economy. It not only reduces affordability but also distorts the market, dampens construction and keeps people in empty big houses commuting long distances rather than living in more appropriate dwellings. Increasingly it is only the rich that can afford a house with all the taxes that go with it.
Of course most of you will know what I am really up to, because the Liberal Democrats really hate taxes. We believe it is right that people should be allowed to do what they want with their own money. We believe that most drunken sailors are better economic managers than governments because at least sailors know what they want and use their own money, but I know you do not agree on this point.
Every government in Australia loves taxes because it allows them to give the money away again and pretend for a moment that they are good people. I know that some of you might be alarmed that all of this beautiful money might no longer be confiscated from hardworking Victorians and the game will be up. So whilst I admit that if it were up to the Liberal Democrats, we would abolish lots of taxes altogether, this is not what the inquiry is about. As much as we hate taxes, we also hate debt. We do not think it is right or moral to leave debt to future generations, so this inquiry would be looking at investigating alternatives. If there was a theme to the findings of other inquiries it would be that stamp duty is one of the worst kinds of tax, but the real trick is finding a way to fill that budget hole.
I will not speculate about what these alternatives might be – that will be the job of the Economy and Infrastructure Committee should this motion pass – but I note that there are many other jurisdictions that have attempted reforms, and I believe it is time that we had a look at how they are working out. So do not fear; the rivers of money will continue to flow, at least until the Liberal Democrats form government a few terms from now. I urge all of those who think housing affordability, homelessness and inequality are important topics to support this inquiry into land taxes and stamp duties.
Michael GALEA (South-Eastern Metropolitan) (11:39): I would like to thank Mr Limbrick for bringing this motion to the house, which does give me an opportunity to speak on this matter, and this is actually a very important matter that is relevant to a lot of people. This government, the Andrews Labor government, does have a proud record of reform in this area, particularly with regard to social and economic policy and how that interacts with our tax system. These progressive reforms have helped to ensure that our tax system remains fair and delivers the essential services that Victorians do rely on, and that is something that I will touch on a little bit later in my remarks. That record not only relates to ensuring that our tax system functions in a fair and consistent fashion, it also includes sensible and measured reductions in taxation, which we have implemented since this government has come into office.
Reviewing our tax system is an important responsibility for any government, and for us in this chamber as elected representatives, that remains particularly the case. I am happy to discuss the form that this government has on tax reform and the achievements that we have already made – tax relief and the effective use of that tax revenue for the benefit of all Victorians. The Andrews Labor government is committed to ensuring that our tax system remains fair and competitive and continues to deliver for all Victorians. In line with this commitment we have ensured that the tax system is constantly reviewed to ensure that it remains progressive and fit for purpose. The government believes in the principle that those who have the means to make a fair contribution to the state should be required to do so. We want to ensure that those who can contribute their fair share. That is the social contract that has helped to enable this government – as well as others across the country but this government in particular – to deliver the services and the better outcomes that we all need to see.
To address the key item of this motion, which is of course land transfer duties – I will refer to it by the more common name of stamp duty –
Michael GALEA: Thank you, Dr Bach. The taxation around property in Australia is a key component of every state’s tax system. As Mr Limbrick mentioned, there are very limited ways in which states can draw upon that revenue, and there probably needs to be a broader tax discussion about how we do structure taxation in this country, where you have state governments delivering the majority of the services and the federal government taking in the majority of the taxes. I know he mentioned the Dr Henry report as well, which also touched on those matters.
There are things that this Labor government has already done to deliver beneficial and needed reforms to stamp duty, such as when the government abolished stamp duty for first home buyers and purchasers when they purchase a property below $600,000. That concession also extended at a limited rate to those who purchase properties up to and including $750,000. I would also like to note that in this time of considerable challenge for renters – and we had a question I believe from Mr Ettershank yesterday, though I am happy to be corrected, that touched on the subject of vacant residential properties – this government has implemented a vacant residential property tax to tackle the challenge of vacant homes. It is one thing completely to have an owner-occupied home, it is one thing completely to have a home that you rent out to tenants, but to have vacant properties sitting idle is and has been an issue, and that is why this government has brought in the vacant residential property tax to address that issue. The government’s reforms overall have meant that thousands of pensioners and first home buyers have had access to government incentives and programs which have helped to make owning a home possible. This also extends to including stamp duty concessions for commercial properties in regional Victoria – that includes exemptions for family farms and concessions for charitable organisations. They are already in place.
The members on this side are proud to support a government that has cut or abolished taxes 57 times since 2014. Under this government we have seen the payroll tax free threshold increase four times. The most recent of these increases saw us deliver a payroll tax free threshold increase by $50,000 to $700,000 by 2022–23, a 50 per cent discount on land transfer duty for commercial and industrial properties in regional Victoria and a cut to the regional payroll tax rate to 1.2125 per cent, which is just 25 per cent of the metropolitan rate, and it is absolutely a good thing to have. It is interventions like these that have seen the regional unemployment rate fall to 2.8 per cent, the lowest on record. I would also note it is less than half of what the regional unemployment rate was at the time that those opposite were voted out of office. Together these payroll tax cuts have saved Victorian businesses about $1.7 billion in the years up to 2021–22, and by the end of the forward estimates period we estimate that they will have saved Victorian businesses around $4 billion.
The fact is that when it comes to tax reforms, when it comes to tax relief and when it comes to dealing with these things in a manner that produces lower unemployment, that creates jobs and that stimulates all levels of our economy, this is a government that is making Victoria a fairer place to live and to invest. We have a proud record. When the members opposite were sitting on this side of the chamber they failed to deliver on these issues.
This motion also draws attention to the state of housing affordability and the access to housing across Victoria, which I would also like to mention. This is a concern for this government, as it is indeed a concern for all governments right now across Australia. We have already taken active steps to improve access to affordable housing whilst creating jobs as well for Victorians. I have already gone over the changes in 2017 which dramatically affected stamp duty, those $600,000 and $700,000 concessions for first home buyers, and I think it is important to reflect that up to January 2023, so up to this year, approximately 223,000 transactions were processed for first home buyer exemptions to stamp duty – 223,000. That is a huge impact, totalling $3.9 billion in stamp duty that would have otherwise been paid by first home buyers, often economically disadvantaged, trying to get onto the property ladder. That is an enormous saving that we have already helped young Victorians and indeed all Victorians to access.
On top of this we have also provided 77,000 first home owner grants, and that is a total sum of $988 million, almost a billion dollars there. That has also been provided over the same period, up to January 2023. Our support for first home buyers in the last financial year alone topped $1.1 billion, and I think that is a very good way to demonstrate the work that we are already doing to lessen the burden of stamp duty on Victorians, particularly those trying to get into the market for the first time as first home buyers. In the 2020–21 budget we also provided temporary stamp duty discounts of up to 50 per cent for all new properties with a contract price under $1 million, and we also did provide a number of temporary stamp duty concessions of up to 100 per cent for new residential properties with a dutiable value of up to $1 million in the Melbourne City Council LGA.
Another mechanism that we have established is the Victorian Homebuyer Fund, which has been a key tool for getting Victorians into their first home. I would like to note here that they do say that mimicry is the sincerest form of flattery, and the Albanese Labor government, as well as the New South Wales Perrottet government, has actually copied and implemented these reforms too. In Victoria alone this $1.6 billion fund has already helped more than 2000 Victorians buy a home. In total the government’s investment is expected to open the door to ownership for 10,000 Victorians. Eligible participants only require a 5 per cent deposit. The government provides up to 25 per cent of the purchase price, and there are some additional concessions that apply for Indigenous and Torres Strait Islander people as well. Home owners can buy out the government share of their properties at market rate at any time, with those funds to the government then being reinvested into this fund to help continue to provide this fund in a self-sustaining form into the future, and that fund can be used for any location right across the state, whether it is in metropolitan Melbourne or regional Victoria. In my own region of South-Eastern Metropolitan there are a number of people who have already taken that up.
With time running out fairly quickly I would like to touch on the general concept of taxation, and I do wish to acknowledge Mr Limbrick’s comments here. As he said himself, he would probably like to see a lot more taxes abolished, and I am sure we would all be curious to see what that potential prospective Liberal Democrats government might look like and what we might actually lose in this state. But I would like to actually quote from someone who is considered one of the founding fathers of liberalism, John Locke, who said that:
It is true, governments cannot be supported without great charge, and it is fit every one who enjoys his share of the protection, should pay out of his estate his proportion for the maintenance of it. But still it must be with his own consent, i.e. the consent of the majority, giving it either by themselves, or their representatives chosen by them …
We have just had an election in the past few months in this state that has seen the Andrews Labor government re-elected, and it was re-elected on the track record and on the promises of further investment in our state. That is probably a very good example of that consent that Mr Locke was talking about. This government has already provided a huge number of services and benefits to our state through taxation revenue, and I will allow my colleagues to talk about that further. But in closing I would like to just acknowledge that we are taking significant steps in a number of areas, as I have outlined, to address home affordability for all Victorians.
David DAVIS (Southern Metropolitan) (11:49): I am pleased to rise and support the motion by Mr Limbrick, and he in his motion seeks to refer to the Economy and Infrastructure Committee an inquiry over six months to look at the range of transfer duties and instruments within the Duties Act 2000, looking at the:
(a) impacts on labour and capital mobility;
(b) revenue predictability;
(c) efficiency of resource allocation;
(d) effects on housing supply and development;
(e) overall tax efficiency;
(2) examining potential alternatives to land transfer duty … and
(3) any other related matters.
We support this inquiry because we are quite disturbed about the way the government has jacked up taxes. There have been more than 43 new taxes brought in by this government since 2014, despite a promise in 2014 that there would be no new taxes and despite a promise in 2018 that there would be no new taxes. And I note a promise by the Treasurer in this election campaign that there would be no new taxes. Every election they promise no new taxes and every election they bring in new taxes.
The point that I would make to Mr Limbrick and others is that, yes, I am very, very aware of the economic literature about the difficulties of stamp duty, about the perverse and difficult consequences that it causes, about the unfairness that it causes and about the distortions that it causes. In pure economic theory all of that is absolutely right. But I do want to add a note of caution. If it were a Liberal government making such changes, I would be far less concerned – but a Labor government considering these changes? Let me be quite clear: I know for a fact they are considering it. I have an FOI in that requests all the documents, assessments and analyses that the government has done over the last two years into this matter. We know that there are 21 of them. VCAT ordered them to provide a detailed list – the dates of creation, who created the document and the nature of the document – so we have quite a detailed list.
Let me just say that this is the most secretive government under FOI we have ever seen. Of the 21 documents that we were able to prove existed, how many do you think the government has released? The answer is none. They are refusing to release the whole lot. Victorians are not entitled to know the assessments, the analyses and the work – including commissioned external work undertaken by the government on exactly this matter – about the shift or proposed shift that economists would point to from stamp duty to a broad-based land tax.
I get what the economists say, but let me ask you another question, and this is a rhetorical question to the community: would you trust Daniel Andrews – or would you trust Tim Pallas – with a brand spanking new land tax on the family home? Would you trust him? How long before he broadened it to every family home? How long before he jacked it up further, given his record of more than 43 new taxes, huge breaches of promises in 2014, 2018 and now, and the state with a spiralling debt heading for more than $165 billion? We know that that debt is going to be greater than New South Wales, Queensland and Tasmania combined. So we have got a massive debt over here, and then the boffins say, well, let us get rid of stamp duty and let us move to a broad-based land tax.
New South Wales has a model that they are looking at. I note that the Labor opposition in New South Wales has opposed this step by the Perrottet government. But fortunately, or perhaps unfortunately, we have a real live model to look at, and that is Canberra. In Canberra they said they were going to move from a stamp duty to a broad-based land tax. That is what they said they would do, and they said that they would abolish the stamp duty. But that is not what has happened, and this is the fear. What has happened in Canberra is that they tweaked the stamp duty and they introduced the land tax, but they failed to follow through with the removal of the stamp duty. Now in Canberra you have both taxes. You have the stamp duty, the massive stamp duty, and the slug on the family home through the new land tax.
It is true that Canberra is a different place than New South Wales or Victoria, or Melbourne or Sydney – the large urban centres and our country centres. It is true. The land tenure system is different. The ownership of land on the long haul is part of the system up there, and it is a slightly different mode. Notwithstanding that, the lesson is still very clear: if you are planning to take the advice of the boffins and the economists and move from a broad-based stamp duty – that is your plan – and you want to go from a stamp duty to a broad-based land tax, and in theory you will derive all those economic benefits, the one analysis the economists never do is if in that movement they keep the old one and they put the new one in too, then you have got both. You have got both. That is what you have got in Canberra. You have got both taxes, not just one. You have got both. And I tell you what, that is what Tim Pallas will do if he moves here.
He cannot be trusted. We know he is looking at this, because he has got 21 documents. We have the list; I am happy to share it with anyone who wants it. Twenty-one documents: analyses, assessments, external groups, all working hard, beavering away, but they will not share it with the Victorian community. What would the impact be on poor people? What would the impact be on single mothers? What would the impact be on those wanting to get into homes? The economists tell us – the boffins tell us – that to move from stamp duty to a broad-based land tax would help people get into homes, but the analyses do not seem to assess, if they keep the stamp duty and you have got a land tax, how that helps young people get into a new home, with two taxes rather than one. That is the fear.
I would not trust them. I would not trust them as far as I could throw them with this. That is their record: 43 new taxes, the biggest debt, new taxes – on and on and on. Mr Limbrick is right, the issue of taxes on homes is very important. The Property Council of Australia and the Urban Development Institute of Australia, and I pay tribute to the work done by the UDIA, suggest that almost 50 per cent of the cost of a new house and land package is actually taxes, embedded charges, embedded levies, all with funny names, all with different names, but they add up to a three-letter word: ‘tax’. And the taxes are in the costs of properties, so tax, tax and tax and tax, all in the properties.
Mr Limbrick then correctly made the point that land release is critical. If you restrict the land release, you force the price up. So we need more land release. There is no question about that. Within the urban growth boundary there is plenty of land that can be brought to market to help keep the price down, so we need to make sure that we do not lose sight of the two big steps that have got to be made to actually make costs more affordable. Meanwhile we have got rates going up and up and up and up, and that is hurting young families. There is no question. It is hurting Victorians everywhere. Mr Andrews will put up more taxes, and Mr Pallas will jack the taxes up in the budget. But I make that one warning: as we look at this in the inquiry, and we certainly support looking at these matters, we need to be very careful. The economists tell us it is all hunky-dory. You will move from a stamp duty over here to a broad-based land tax, and it will all be fabulous. But the one assessment they never do is the one that says the government does not remove the stamp duty after all, and we have the real-life example in Canberra. That is what the Labor government in Canberra has done. It has put the land tax in, and it has kept the stamp duty. That is the fear.
Business interrupted pursuant to sessional orders.