Page 2384 - Week 06 - Thursday, 23 June 2011
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which is the position that Mr Seselja seeks to promote, but by the reports done through Macroeconomics and other eminent experts who have looked at this issue in particular.
The issue has been the subject of considerable discussion with industry. I accept that, and I accept that the property industry in particular would like improvements to be considered and included in the V1 valuations. The issue here is that the lease variation charge is about the value of the land and purchasing of additional rights, property rights, through the changing of a lease. What needs to be captured through this is the value of the land. That is the principle. Inclusion of improvements in valuations will create distortions in the market and it will result in the taxpayer effectively subsidising the property developer.
We have seen examples of this in the residential housing industry where you have two bidders for a property and one is a person who would like to live in a house and one is a developer who would like to demolish the house and put up additional housing. We have seen the results of that in that the developer will outbid the person who wants to live in the house in order to change the purpose of that lease and gain significant economic benefits from changing that lease.
What Mr Seselja asks us to do is to support a system where the taxpayer subsidises the use of that improvement for the time that the developer is considering an alternative improvement and then compensates the developer for the demolition of that improvement in order to gain further, additional economic benefits from putting a new structure on that lease. This is something that the government will not support.
Another example is, say, an office building, which has an economic value based on future rental streams. If this is to be taken into account, the taxpayer will effectively pay for the economic value of that building and the developer will then demolish that building and put up another building which he or she has changed the lease for. So, in effect, the taxpayer will subsidise or pay for the demolition of that structure. This was not intended as part of the policy and the government believes that these costs should not be borne by government. The government opposes the amendment.
Mr Smyth: It is insane.
MS GALLAGHER: It is not insane, Mr Smyth. It is not insane at all. Think about the example I just gave, where developers are prepared to pay hundreds of thousands of dollars more for a perfectly good house because of the redevelopment opportunities. If there is somebody who wants to purchase that house, it might be quite reasonable for that dwelling to remain as a residential dwelling, but because of the economic opportunities and benefits from changing the lease, the developer is keen to and will distort the market by paying much more than the value of the lease in order to gain the benefits, particularly when they are subsidised by the taxpayer in relation to the improvements, in order to deliver another outcome.
The government will not support this. It is not central to the betterment principle. This is around varying a lease. We accept that the property industry want to minimise the charges that they have paid, and I think we are all here with our eyes open about that.
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