Page 3025 - Week 10 - Tuesday, 14 September 1993
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I have attempted to set in context the issues that were considered by government in reaching its decision. To this end, I wish to announce that it is the Government's intention to introduce in the next Assembly sitting changes to the Land (Planning and Environment) Act 1991 which will change the formula used to calculate betterment to eliminate the potential of lease purpose change from being taken into account when the present value of the lease is being calculated. In other words, the calculation of present value will have to be on the basis that no lease purpose change will occur during the life of the lease. The concerns which have been raised regarding the current situation are justified. Under the current formula, it was possible that the before and after values could converge, especially in areas that had been identified by the market or the Territory Plan as likely redevelopment opportunities. Thus the community's return when the lease purpose clause was changed could be severely eroded. The Government will move to restore this return.
The Government has also decided that there will be no remission for lease purpose changes involving changes from residential to commercial or commercial to higher order commercial. The full 100 per cent rate will now apply in those circumstances. The Government will, however, maintain the existing scale of remissions in respect of changes from residential or commercial to other residential. Given the Government's decision to remove potential value, betterment of 100 per cent imposed with no remission would almost certainly slow urban renewal. The incentive to redevelop would fall. The immediate effect would be a reduction in the total return of betterment. Thus, imposing a goal of a 100 per cent return to the community in respect of residential change could see an overall fall in betterment revenue because of decreased construction levels.
There is a broader concern than revenue returns that needs to be taken into account. The Government has adopted an urban renewal policy and, if 100 per cent betterment were imposed, development associated with urban renewal could become more expensive, at least in the short term. Residential development in greenfield areas would therefore become more attractive, which would act against the objectives of the Government's land program and increase capital costs. Commercial developments were, however, not considered to be consistent with the policies and principles that underlay the decision not to change the remission schedule in the other cases I have referred to already, in particular the need to keep the urban renewal program on track.
These changes will affect all applications to vary leases that are received from 5.00 pm today. In the main, this will affect commercial and residential leases. However, an exception will be made in respect of the Fyshwick area and in the Kingston-Griffith redevelopment area. While leases in Fyshwick have been issued for industrial purposes such as light manufacturing and storage, they have been used for higher order purposes, mainly retailing. The practical effect of this has been recognised and accepted by previous governments, while all efforts have been made to encourage lessees to regularise their leases. In part, the current betterment arrangements have facilitated this, as the valuations for betterment purposes have not involved a significant betterment payment because the illegal use was recognised.
The proposed change to the definition of "present value" will alter this position and could result in substantial betterment payments being required. Lessees will be less inclined to pursue lease variations. I believe that the initiative, which has been supported for some years, should continue; hence the proposed changes will not apply to the Fyshwick area for a period of 12 months.
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