Page 259 - Week 01 - Thursday, 15 February 2018
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since the change from the change of use charge to the lease variation charge, the LVC has a simple premise, that the Canberra community should share in the unearned windfall gains from development.
When a developer buys a block of land and receives permission to vary the lease on it to add, for example, more residences or more commercial facilities, this is an unearned windfall gain from a lease variation. The government’s very strong view is that the Canberra community should share in some of the resulting unearned increase in value. By capturing some of these unearned windfall gains from a lease variation at the stroke of a pen and the development that then ensues, this allows the government to fund the increases in services and infrastructure that go hand in hand with these new developments in order to protect our city’s livability.
This bill introduces changes to the lease variation charge to levy this charge in a way that is clear, transparent and works best within what is a complicated logistical and financing matrix for major developments. The bill introduces a deferred payment scheme that will create more flexibility for project proponents in managing their construction works and cash flows.
Currently a lessee pays the lease variation charge before a nominal lease is varied. Under the deferred scheme, lessees with an assessed charge greater than $100,000 will have the option of deferring payment to a later date after the lease is varied. In this way, lessees who qualify for the scheme can elect to pay their lease variation charge nearer the end of a project to better match development cash flows. To participate in this scheme, lessees must enter into an arrangement with the Commissioner of ACT Revenue for the deferred payment of the lease variation charge.
Interest will accrue on the deferred amount at the rate of the three-month bank bill swap rate plus 1.8 percentage points. For members’ benefit, at current interest rates the total is around 3.6 per cent. This interest rate ensures that the ACT community is not subsidising the deferral of payments by developers.
The bill contains transitional provisions to allow leaseholders who have had their LVC assessed but not paid to apply for a deferred payment before the amendments commence. These provisions will expire after 12 months. Under the arrangement, lessees must pay these deferred amounts before a certificate of occupancy for the building is issued or before the end of a four-year period after the lease is varied, whichever is the earlier. Interest and penalty tax under the Taxation Administration Act will also accrue if there is a failure to pay within the set time frames.
The deferred amounts will be secured by a first charge on the land and, if required, the revenue commissioner may exercise powers under taxation legislation to sell the land to recover the debt due to the territory. This charge on the land and the four-year time frame are important integrity measures to ensure the protection of territory revenue.
The bill will make provision for operational aspects of the deferred payment scheme such as the inclusion of deferred charges in the planning register along with other details of the development application, the application process for a deferral, the process if the LVC amount changes following a reconsideration and the process for
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