Close the loopholes but not the door on our economy

Jennifer Cunich | Thursday, 5 March 2009 6:00 AM | Add Comment

In 2008, with little fanfare, the State Government passed a bill that will affect every rental agreement you sign and has the potential to make Victoria the most unaffordable state in Australia to rent a property.

The Duties Act Amendment Bill received little attention at the time. The state government said it was designed to close loopholes in our system which meant certain people could avoid paying stamp duty on the purchase of a property.

Let me clearly state that the Property Council does not support tax avoidance. That is not the issue.

Upon closer inspection of the Bill the devil in the detail revealed an alarming oversight by the government.

The government’s original press release talked about “complex long-term lease arrangements” and specified proposed changes would not affect anyone entering into an ordinary lease.

But nowhere in the Bill are long-term leases mentioned.

That means every tenant in Victoria could, regardless of the value of the property, pay stamp duty on the underlying value of the land.

I have met with government and opposition members to raise the alarm about the disaster this bill could unleash on our economy if allowed to pass in its current form.

All of us understand that the economy is going through a tough time. We are all worried about ours and our children’s jobs and paying the bills.

No one at this time should be talking about slugging an unfair and unaffordable tax on the Victorian community when what we actually need is a boost to keep our economy strong and growing. No one that is, except the Victorian State Revenue Office.

The impact of this poorly thought out legislation on the retirement sector has already hit the headlines.

Retirees faced the prospect of paying upward of $25,000 each on their units regardless of their circumstances. Rightly, after pressure from the Property Council, the Government caved on this issue announcing that retirement villages will now be exempt.

Whilst this was a step in the right direction, more needs to be done to make sure more innocent Victorians are not caught up in the government’s tax slug web.

And there are plenty of potential victims out there. From university students looking for cheap, affordable accommodation to any business entering into a commercial, retail or industrial lease through to small business owners – all of them could be liable to pay stamp duty on their leases.

Let’s take the example of a young family looking for cheap rental accommodation. The lease specifies the carpets must be steamed cleaned when the lease is up. This simple but common clause will trigger duty, to be paid by the tenants. On a house worth $400,000 the tenant will be liable for over $19,000 in duty. Everyone knows we already have a rental crisis in Melbourne!

The proposed law also could have a catastrophic impact on businesses in metropolitan and regional Victoria costing jobs and investment making Victoria the place not to do business.

These problems could have been avoided if the Government undertook a comprehensive, open and transparent consultation process. The Bill is due to be debated this week. The logical solutions to fix this mess is for the Bill to be pulled or the Opposition, with the assistance of the minor parties should step up to the mark and oppose the Bill.

The logic is simple. Slugging a slowing economy means jobs will go and our quality of life will suffer.

At a time when we are looking to governments across the country to stimulate the economy, unintentionally increasing taxes on the community at large will have disastrous consequences.

The Property Council supports the State Government in its attempt to close a loophole to stop genuine tax avoidance. We do not agree with a blatant tax grab by the State Revenue Office under the guise of anti-avoidance measures.

I implore the Treasurer to rethink the Governments position and withdraw or amend this legislation from Parliament or all Victorians will pay the price for this policy bungle.

Click here for the Duties Amendment Bill reading

Have your say.

Jennifer Cunich | Thursday, 5 March 2009 6:00 AM | Add Comment

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