Page 1048 - Week 04 - Tuesday, 6 May 2014
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• abolition of commencement provision in new Crown Leases;
• the removal of the trigger for EOT fees to be paid on breaches of the commencement clause; and
• changes to the hardship provisions for a fee reduction.
The problem is that, while that will have some effect, what it does not do is actually address the problem. What it does not do is address the damage done before the time frame that the government has put in place in the bill. The problem is that a large percentage of the cost that is going into the accumulation of extension of time fees is not taken into account. That is because the government has failed to address section 277A(1) in the existing act. That is the part of the act that says that an improvement in relation to the land comprised in the lease must not be taken into account. The problem with this is that the builders may have already started to do some improvement but they actually get no compensation for that fact.
The second thing is that the large proportion of the accumulation of costs probably occurred before July 2012, but if you purchased a block of land perhaps at the start of the GFC and you have been unable to build—you might have done some work but you have not progressed further—there is no recognition of that. The truly big debts occur in the period that the government is not allowing to be included inside this legislation.
The government adopt the approach: “Well, we’re doing something.” You might be doing something, but you have to question what the effectiveness will be. My consultation with the industry says they do not believe that this will affect a huge number of people. The government could not tell us how many people it will affect. Of course, people take whatever they can get, but the reality is that large parcels of outstanding debt will stand simply because the government have excluded that period from this bill.
If we are serious about making sure there is stimulus, if we are serious about ensuring that we have get development going ahead to protect jobs and continue to build the city and if we are serious about making sure the government gets the revenue that it needs from the construction industry so that it can continue its work then we should get this right. Here is an opportunity to get it right. The question is whether or not the government will take up that opportunity.
We see there is small value in what the government has put here. We think there is a way of making it work much better. The feedback we are getting from the industry is that it has become a significant disincentive to development. You can see from the lease variation charge that the revenue forecasts have simply plummeted, indicating that the volume of redevelopment in the city has dramatically reduced. Commence and complete, the extension of time, should never have been introduced in the way that it has been and applied to the non-residential sector in the first place.
With regard to the bill itself, the problem with lease variation is that, whilst there is a welcome easing of the regime, until and unless there are offsets provided against the LVC for the existing improvements many redevelopment projects will simply remain unviable. There is need for a full offset for offset works that may be required as part
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