Page 1497 - Week 05 - Wednesday, 10 April 2013

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I will now take the opportunity to discuss the policy rationale behind the lease variation charge. As members would be aware, the ACT is the only Australian jurisdiction with a leasehold land tenure system on which the government may provide additional or amended rights and privileges attached to a lease. Invariably, the provision of these additional or amended rights adds directly, and often considerably, to the land value, and it is on this principle that the change of use charge has been levied for more than 40 years. The lease variation charge continues this.

It is a very simple statement that it is only fair that the community recovers some of the unearned value that is provided to the leaseholder through no other effort than the lease having been changed to grant additional development rights, and that this additional value, and that government share of it, is redistributed back to the community. This is known as the betterment principle, and it is the foundation upon which the lease variation charge is based.

In the simplest of terms, the lease variation charge is a payment for the granting of additional development rights to a lease which directly increases the value of the land. This is effectively no different from the payment for a greenfields land sale. It is correct, and it is important, to charge the market value for the additional development rights and the value attached to those rights. It is also important to recognise that betterment charges are not only fair but also critically they are economically efficient, a fact recognised by every eminent economist.

As one of many examples, ACIL Tasman stated:

The Change of Use Charge has a very strong basis in economic theory. Economic rent is defined as an excess distribution to any factor in the production process above the amount required to draw that factor into the process or to sustain the current use of the factor.

True economic rent can be selected 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.

To the extent that it is successful in isolating and then taxing those rents, it should have no impact on production and consumption decisions.

The rationale for the Change of Use Charge would be in keeping with the recent Henry Tax Review.

Since 2010-11 the lease variation charge has raised a total of $42.8 million, and with, as I indicated in my amendment, a further $15.411 million having been determined but not yet paid.

The lease variation charge has not stifled building activity in the territory, as has been claimed by the opposition. In fact building activity continues to grow. This is reflected

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