LAND TAX (MISCELLANEOUS) AMENDMENT BILL

Final Stages

The Legislative Council agreed to the bill with the suggested amendments indicated by the following schedule, to which suggested amendments the Legislative Council desires the concurrence of the House of Assembly:

No. 1. Clause 4, page 3, after line 23—After subclause (1) insert:

(1a) Section 5(10)—after paragraph (b) insert:

(ba) land may be wholly exempted from land tax if—

(i) the land is owned by a natural person and constitutes his or her principal place of residence (whether or not he or she is the sole owner of the land); and

(ii) the buildings on the land are used for the purposes of a hotel, motel, set of serviced holiday apartments or other similar accommodation; and

(iii) more than 75% of the total floor area of all buildings on the land is used for the person's principal place of residence;

(bb) land may be partially exempted from land tax by reducing its taxable value in accordance with the scale prescribed in subsection (12) if—

(i) the land is owned by a natural person and constitutes his or her principal place of residence (whether or not he or she is the sole owner of the land); and

(ii) the buildings on the land are used for the purposes of a hotel, motel, set of serviced holiday apartments or other similar accommodation; and

(iii) 25% or more of the total floor area of all buildings on the land is used for the person's principal place of residence,

(and for the purposes of the scale prescribed in subsection (12), the area used for the hotel, motel, set of serviced holiday apartments or other similar accommodation will be taken to be the area used for business or commercial purposes);

No. 2. Clause 4, page 3, after line 34—After subclause (3) insert:

(3a) Section 5(12)—delete 'subsection (10)(b)' and substitute:

subsection (10)(b) or (bb)

Consideration in committee.

The Hon. K.O. FOLEY: I move:

That the Legislative Council's suggested amendments be agreed to.

The Land Tax (Miscellaneous) Amendment Bill 2010 provides that from 2011-12 all land tax thresholds will be indexed by the average movement in land prices. The average percentage change—and this one will bring a tear to any Treasurer's eye around Australia—in land values for a particular financial year will be determined by the Valuer-General, having regard to the Valuation of Land Act 1971 and the Land Tax Act of 1936.

Honourable members have expressed an interest in understanding the methodology that the Valuer-General will apply to determine the average percentage change in land values. The government has previously provided a working formula to members of parliament that summarise the Valuer-General's approach.

Following further examination of various approaches to determining the average change in land values, including having regard to feedback provided by honourable members, particularly the Hon. John Darley MLC, during briefing meetings on the bill, the Valuer-General has now advised that he intends adopting the following methodology to determine the average percentage change in land values.

Proposed methodology: the Valuer-General will undertake the analysis of land value changes for the taxable properties following gazettal of completion of the general valuation in late May—in any given year, I assume. The average percentage change in land values in 2011-12 will be determined as follows:

Taxable properties for the 2010-11 financial year (from Revenue SA's database) will be used as the taxable properties data set.

The Valuer-General will determine the change in total taxable site values for those properties between the values in force for the 2010-11 year and those determined for the 2011-12 year, and use those values to calculate the average percentage change in site values.

I can see the shadow treasurer has had his hand in this methodology. It seems like he would have contributed to the architecture of this. Average percentage change in site values equals total land value in year 2 for properties in the taxable property dataset. That is the top line and we now put a line underneath that. Then we have a total land value in year 1 for properties in the taxable properties dataset minus one multiplied by 100. So you divide year 1 by year 2, minus one and multiply by 100.

The underlying principles in this approach and the previously circulated working formula are consistent. I know there are some doubts in this house, but I assure members that, on advice, they are consistent. The Valuer-General considers that this approach will ensure that the average percentile change—actual percentage change in land values—reflects as accurately as possible movements in the land values of properties subject to land tax. Madam Chair, are you comfortable with that?

The CHAIR: I am very comfortable with that, but I think perhaps the member for Davenport would like to speak.

The Hon. K.O. FOLEY: He might want to elaborate further on the methodology, in particular.

The Hon. I.F. EVANS: I rise to support the motion moved by the Treasurer in relation to the amendments from the other place. The reason the Treasurer has kindly updated the house on the new valuation methodology is that the house was advised in the original debate on the bill of a different methodology. The opposition thought it was important that the house be totally informed of the formula that will be used, so that is the reason the Treasurer gave us that statement—and I thank the Treasurer for that.

The opposition is supporting the amendments moved by the Hon. John Darley in another place. I thank the Treasurer's officers, both his personal staff and the departmental staff, who were called to a briefing late yesterday afternoon that continued for some hours so that the opposition could get a good understanding of what problem the Hon. Mr Darley was trying to fix through his original amendments—the amendments before us now are different from what the Hon. Mr Darley moved originally in the upper house—and what options were available to the parliament to fix it.

I sincerely thank the officers for coming in at short notice, particularly Mr Bray who was ill yesterday and despite ill health came in to brief the opposition. We certainly appreciate that—it shows dedication to the cause.

The problem Mr Darley was trying to fix relates to a constituent who was living in a hotel in the South-East and part of the franchise agreement of the hotel chain required that person to live on the premises. That person basically lived on the second floor and other parts of the hotel and, as it turns out, was not eligible (as it stood) for consideration of land tax relief for principal place of residence reasons. That is a Reader's Digest version of the problem we were trying to solve.

I thank the officers for providing to the opposition legal advice which clarified the government's legal position and which certainly brought some clarity to the meeting. The opposition on this occasion was not going to ask the government to take a position contrary to its own legal advice, and that is why these new amendments in a different form have been drafted and put through the upper house and are now accepted by both the government and the opposition.

These amendments put the issue of owners of hotels living in the hotels essentially on the same footing for land tax purposes as bed and breakfasts. That is a Reader's Digest version of what the amendments do. That will solve the Hon. Mr Darley's problem, and therefore the opposition supports the amendments. The Hon. Mr Darley also moved amendments in relation to the Commissioner of Taxation's requirement to have no doubt at all in relation to minority interest on the aggregation of land tax issue and, following a detailed briefing by the commissioner about that issue, the opposition decided not to support the Hon. Mr Darley's amendments and, indeed, supports the government's position on that issue.

From memory, the advice to us was that it was a hit to the budget of around $20 million to $21 million a year, and the opposition agreed with the government on that issue, and the Hon Mr Darley decided not to proceed based on the results of that briefing. The opposition does not intend to delay the house any longer on this issue. I just remind the house that a different valuation formula is being used than was originally advised. That is now in the Hansard for everyone to be aware of. Again, my sincere thanks to the officers coming in at short notice, and we look forward to the passage of the bill.

The Hon. K.O. FOLEY: What an excellent contribution by the shadow treasurer. I just thought that, in a spirit of bonhomie, is it, Patrick?

The Hon. P.F. Conlon: Sounds good to me. It's all Greek to me.

The Hon. K.O. FOLEY: I thank the shadow treasurer for his generous and complimentary words, which are somewhat in contrast to about 45 minutes ago when he was trying to tear me down and destroy my career, and my very good staff, about whom he was so complimentary, would have been out of a job. Notwithstanding the shadow treasurer's attempts to destroy the lives of about 12 people, I do thank and acknowledge his contribution, as I do to the Hon. John Darley, who is with us.

I think that between the Hon. John Darley, the Valuer-General and, perhaps, the tax commissioner, I am not sure that too many people can understand that methodology. The reason the shadow treasurer said that he would give only a brief description is probably why I am giving only a very brief description of it as well. Sometimes little is best when spoken from politicians. I thank the Hon. John Darley in another place for his very constructive input into refining this piece of law, and it is onwards and upwards.

The CHAIR: It is nice to see that everyone is finally getting along.

Motion carried.