TAXATION LAWS AMENDMENT BILL (NO. 3) 2002: Second Reading
Mr CADMAN (Mitchell) (11.40 a.m.) —The Taxation Laws Amendment Bill (No. 3) 2002 imposes a number of changes on tax laws. They appear to be straightforward until one looks at some of the changes that are being made to the application of the GST with respect to land development.
I think most members would be aware that the Commonwealth government is not involved in land development, but state and local authorities are often involved in the development of their land or in changes of land values.
This bill seeks to cover the Commonwealth with regard to the goods and services tax and land development. The short summary of the new law in the explanatory memorandum states:
... a supply, by an Australian government agency, of a right to develop land, is not treated as consideration for the supply of an in kind developer contribution, if the supply of the in kind developer contribution complies with requirements imposed by, or under, an Australian law. Therefore, the supply of an in kind developer contribution will not be a taxable supply;
The second part states:
... a supply, by an Australian government agency, of a right to develop land, is treated as a supply that is not made for consideration to the extent it is made in return for the supply of an in kind developer contribution that complies with requirements imposed by, or under, an Australian law. Therefore, the supply of the right to develop land will not be a taxable supply.
The explanatory memorandum then has various tables which indicate what the old and new law mean. In summary, as I understand it, if an Australian government agency provides a right to develop land, it will not be taxable, whereas under the current law it is.
This affects the ADI sites around Australia; hence the interest of the member for Chifley in this issue. Whilst I reject the hyperbole of the previous speaker, the member for Rankin, the need to express things with clarity adds reams and reams of paper to the tax act, and what I have read out does need explanation. The detail in the explanatory memorandum does make clear what is intended by this particular change.
The memorandum provides the example of an imaginary council, the Rushmore Council. I will summarise that example as best I can. The Rushmore Council is an Australian government agency. It provides planning approval in the form of a right to develop land under a state planning act. The state planning act allows Rushmore Council to require developers to provide capital works either to itself or to somebody else in return for the provision of a right to develop land. A private company—a local land developer—comes along and is provided by Rushmore Council with a right to develop land. The company is required to supply the council with capital works. It has to put in kerbs, guttering and all sorts of things that go along with the supply of land. Under the goods and services tax, that is classified as a supply and is therefore taxable. The supply by Rushmore Council of the right to develop land will not constitute a consideration for the supply made by a company doing capital works. Therefore, in this process, the company doing the capital works has not made a supply to the council. So it relieves Australian agencies of the need to fork out goods and services tax for some land development processes.
The bill goes on to define what the right to develop land may include, such as:
·a re-configuration with no change in use (subdivision);
· no re-configuration, but a material change in use (rezoning);
·re-configuration with use as a right (permitted subdivision); and
·re-configuration with change in use (subdivision and rezoning).
A number of factors apply to Commonwealth land and the way it may be used.
I refer the House to the St Marys site in Sydney, an ADI site that I believe this legislation may apply to. I would like a number of questions answered by the Parliamentary Secretary to the Minister for Finance and Administration or the details provided in writing at a later stage. The library, in good form, have prepared a digest on this bill that mentions the applicability of these amendments to the ADI site. They obviously gained their information from somewhere. Mr Deputy Speaker Mossfield, I know that you are familiar with the circumstances. Just to refresh the memory of members of the House, the Bills Digest states:
The St Marys site covers approximately 1 545 hectares (ha) and was rezoned for urban and other uses by the NSW government in January 2001. It was envisaged that approximately 8 000 homes would be constructed on the 867 ha available for urban development, 630 ha would be set aside for a regional park to preserve flora and fauna and approximately 42 ha will be used for regional open space. Not included in the regional park area was approximately 178 ha of Cumberland Plain woodland which was listed on the Register of the National Estate ...
This is a most controversial decision in that area. Some of the land has been despoiled and is therefore not capable of being kept, but it covers a large area of Western Sydney, one in which no development or activity has taken place. It is the old munitions facility at St Marys, so blockhouses and ammunition dumps cover the site at various places. Kangaroos, emus and some sheep roam on this land and have roamed on this land for as long as I can remember. The area is probably in a very similar state to when it was first explored by Captain Phillip.
There is a strong link between the residents of Western Sydney and the ADI site or the St Marys munitions factory area. When it was proposed that this land be sold or redeveloped, locals, including the Penrith Council, came out strongly in opposition. There was a strong move for that land—all of it; the whole 1,545 hectares—to be preserved as a park. It would be similar to Centennial Park in Sydney and would give Western Sydney its own Centenary of Federation park covering a huge area. Forever available to the public, it would preserve the great value of the woodlands, flora and fauna there and it would allow a regional park, a national park, of great value to be retained.
However, some development was proposed. Gradually this government has clawed back land that was for further park use, and this became a matter of controversy during the last election. The preamble about this land relates to the fact that it appears that this legislation will relieve all payment of GST in regard to development of or changes to this land. There is no requirement for the developer, which I think in this instance is Lend Lease, to pay the goods and services tax. That is an interesting process that I would like clarification on: to what extent is the developer relieved; to what purposes will that relief be put; and can we have details of that relief? The explanatory memorandum to the legislation spells out some of the prospective uses of the land by a developer which will be relieved of the goods and services tax, but let us have clearly stated and in detail exactly what is proposed here.
I want to talk about this site because I agree with the residents—I know that the member for Lindsay also has very strong feelings about this issue—that the site ought to be retained. I do not believe that it should be developed at all. The cost to the community in Western Sydney of extra infrastructure will be massive. The roads are already choked in Western Sydney; this new development site of 8,000 homes raises the prospect of getting people to and from work. The member for Chifley is unbelievable. First of all he backed the government's decision 100 per cent to put an airport in the middle of Western Sydney, after first opposing it for a number of years, and now he is saying that the St Marys site is a good development. There are a lot of things that ought to happen in Western Sydney rather than covering the place with extra houses. People in Western Sydney deserve a lifestyle.
I believe this park offers a memorial to federation and to the bicentenary of the establishment of Australia that will last for many years. People will say, `You've got a wonderful section of land set aside for a park.' Some of it has been set aside for a park, but I think the whole lot ought to be set aside. Extra road and rail infrastructure, hospitals and schools—all those extra services—are not accounted for in the sale and proposed use of this land for additional housing.
I am aware of the need to provide additional industrial development because, in the west, the demand is for jobs. We all know what the unemployment rate is and that something ought to be done about decreasing it. This government has done a massive amount of chopping into the legacy of high unemployment left by the Labor Party. That is one of the reasons I believe we have been so successful as a political organisation in Western Sydney: we are providing the services that Labor failed to produce. But increasing the population of Western Sydney—as the New South Wales government would have us do, with more and more houses—is the wrong approach, the wrong plan, and it will have many downstream costs to do with infrastructure charges and infrastructure inconvenience. It will exacerbate—with poor roads, not enough schools, not enough preschools, not enough rail services and an inability for people to find sufficient work—a situation that should be carefully managed. Therefore, I believe this land ought to be preserved in its entirety.
I read with great interest the press release of 19 January 2001 from the member for Chifley, in which he welcomed the development of the ADI site and said that it reminded him of Bob Hawke's visit to his electorate some time before. But, during the last election campaign, this government made a commitment that additional land would be used for parks. Two weeks before the election the announcement was made and the commitment was signed by John Howard. The local Labor candidate, Mr Bradbury, said that you could not believe a politician; he made the same promise a week later, but did not put it in writing or anything like that. Immediately after the election we delivered on our promise, as per the press release by Senator Eric Abetz of 12 March 2002. He did the right thing; he moved in and set the land aside. This bill applies to the remainder of that land, where further development may or may not take place. Does it apply to the park areas? Who is going to develop those? Is this a deal between state and federal governments? Where is the goods and services tax being removed, how is it being removed, and who is going to benefit from its removal? That is what I would like to know.
I turn to the remainder of the bill. I noticed, at the time, that the introduction of the GST on rental cars was a matter of controversy and concern among hire purchasers. They were concerned that there was a hangover value beyond the date of commencement. It meant that they paid the wholesale sales tax for the purchase and, in some instances, a portion of the goods and services tax as well. Then, upon sale of the cars, they were not able to recover the funds they expected to recover. This legislation seeks to set right that problem. I regret that the government has delayed this decision. I think it is a good decision. It would have been much better to have announced it—and thereby provided the relief—at an earlier stage, but I am delighted that it has now happened. The changes to general insurance picked up in this legislation are also welcome. The impact of the changes for general insurance companies allows an averaging of the process of insurance. Many other industries have these benefits; therefore, this is a logical change to the legislation.
Far from being new tax law, these changes—as with so much of what this House does, initiated by the government—improve and finetune the legislation. The issues we are dealing with today—the rental car change and the general insurance change—are improvements and modifications that have long been wanted by various industries. When the government examined them it found them perfectly reasonable, and they have been carried out promptly and carefully. I commend the government for its willingness to listen to the need for change in the tax system, and I press it to go further in modelling our tax system—being, as it is, the best and most effective in the world, particularly with regard to the cost of compliance. I encourage the government to look at a scoping study, perhaps carried out by the Productivity Commission, to see where we can further improve. Australia must be the best at production and we must have the best figures as far as costs and export capacity are concerned, but we must also be very good on our administrative costs.
I look forward to further information with regard to the goods and services tax and its relationship to land development as linked to the Commonwealth. In particular, I make the plea for more land in the ADI site to be set aside for park use and for careful consideration to be given to the provision of jobs by having some neat, clean secondary industry—of the type I am fortunate to have in Norwest Park in Mitchell—in the area instead of more houses. I know the member for Lindsay is anxious to encourage industry of the right type into the area to make sure there are great job opportunities on the site—close to where people need them, close to an intelligent and well-educated work force and which will be beneficial to the school leavers of the Lindsay electorate and surrounding districts.
Author: Alan Cadman MP
Source: House Hansard - 26/9/02
Release Date: 24 Oct 2002