Legislative Assembly for the ACT: 2011 Week 5 Hansard (5 May) . . Page.. 1879..
proportion of any windfall gain accruing to a lessee from a variation to their lease is returned to the community.
The betterment principle has a solid basis in economic theory, as recognised by ACIL Tasman, the advisers to the 2010-11 Select Committee on Estimates. They stated that the change of use charge "has a very strong basis in economic theory. True economic rent can be collected by governments for the purpose of public finance without the adverse effect caused by taxes on production or consumption. The change of use charge appears to be an attempt to isolate and tax economic rents."
Members would be aware of the many changes undertaken to the betterment system over time. The system had become complex and inefficient and needed improvement. That is why, in the 2009-10 budget, the government committed to codify the change of use charge to increase efficiency and transparency in the system. I note that this was a recommendation by the Property Council in its budget submission that year.
Codification will have a number of benefits for the ACT. It will simplify the current system by clearly setting out the amount of change of use charge payable. Those undertaking redevelopments within the territory will be able to determine the amount of change of use charge payable up-front. This is perhaps one of the important benefits—that projects can be planned up-front, knowing all the costs without resorting to time consuming and costly valuations. As the codified schedules will reflect current market values for individual suburbs, developers will now remunerate the territory the appropriate charge for the grant of development rights.
The government has undertaken a considerable amount of work on this reform over the past two years. There have been a number of independent expert reports on this matter, which I tabled in the Assembly late last year. Today, I introduce the legislation to complete this important microeconomic reform so that codification can commence on 1 July 2011.
Mr Speaker, there seems to be some confusion regarding the impact of codification. There have been suggestions that the government is increasing the charge and that codification will have a major impact on the industry.
It is important that the impact of codification is understood clearly. Members would recall that a practice of applying fixed valuations and fees for units, townhouses and dual occupancy developments was identified last year. Clearly, this was not the intent of the legislation. The practice was rectified at the end of April 2010. The rectification of the system reflects considerable increase in the charge. That, however, is even before the codification comes into effect.
That increase reflects how much of the windfall gains have not been returned to the community, as envisaged under the original betterment system. The schedule of values under codification are based on the market values and in fact they are averaged over three years to remove any fluctuations. In principle, there should be no or negligible impact from the introduction of codification itself. That is what the expert reports also confirmed.