Page 2382 - Week 06 - Thursday, 23 June 2011
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contradictory for the government to have a V1 and V2 system which is based on the fact that you get additional value as a result of the lease variation.
If the principle that is at stake here is that you have some value that you have presumably paid for—you might have an office building on a block of land; you have paid for the office building and you have paid for the land—the lease variation allows you to do different things which may have more value to you. It is absurd to suggest that in working out what is the windfall that will be taxed—because that is what we are talking about here; we are talking about taxing a windfall gain that goes to someone as a result of the lease variation—and in taxing that windfall we should not have regard to what value the person has prior to the change.
We put this to the officials during our briefing and the officials suggested to us that this was a purer way of doing it. I am not exactly sure what was meant by that, but when it was suggested that it would discourage someone who may have an office block from developing a residential development which we may well want, we were, of course, put back to: “Well, that allows us the levers. This legislation allows us the levers.”
So in most cases we will have a situation where, indeed, it may be not viable and not commercial, as a result of this clause, to redevelop. And in many cases it will not be, because someone who owns that office building, who has paid for that value, who has some economic value there, is being told: “If you change, we will disregard the value that you have at the moment. We will assume you have no value, that there is no economic value in that building.”
That does not make sense. It actually undermines the philosophical underpinning of the legislation, which is that you get a windfall as a result of a lease variation. You have existing property rights, you get additional property rights as a result of the lease variation, and we tax those additional rights. The only way to do that in the case of V1 and V2 is to have a situation where we consider what that existing value is. That is what the “V” is. The “V” is about value. To suggest that if we redefine it we could pretend that there is no value in that building undermines the whole basis and the rationale for levying this tax.
My amendment would actually ensure that that value is taken into account. I have not heard from officials, I have not heard from the minister, I have not heard from anyone, justifying why it is that we would not take that value into account. We are dealing with two different issues here. We are dealing with codification, but in the case of V1 and V2, of course, it is not codified and it cannot be codified. So in certain circumstances under this legislation we are going to be applying a similar approach to what is applied now, that apparently applies well under rectification, according to the government.
If we are serious about that then we have to have a fair dinkum value in the first place and then look at the new value—look at the new value, minus the old value, get the difference and put the tax on that. That is the principle of this legislation. That is the principle underpinning change of use. Whether or not the government calls it a charge or a tax, that is what we are talking about.
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