Legislative Council Fifty-Second Parliament, Second Session (52-2) 52 2 Parliament of South Australia Legislative Council published Bills Retail and Commercial Leases (Miscellaneous) Amendment Bill RETAIL AND COMMERCIAL LEASES (MISCELLANEOUS) AMENDMENT BILL Second Reading Second Reading Adjourned debate on second reading. (Continued from 13 November 2013.) The Hon. R.P. WORTLEY Legislative Council The Hon. R.P. WORTLEY (22:44): My understanding is that the catalyst for the Hon. John Darley introducing this amendment bill relates to his concerns about accounting and transparency in relation to the payment of land tax within retail and commercial leases. Whilst the Hon. John Darley's intentions for this are desirable, there are a number of unintended consequences which may result from what is being proposed, which would require further investigations than the short time we have to debate the bill in the house. In relation to nondisclosure of land tax charges, this amendment bill tries to provide transparency in the exact component of land tax a lessee is paying on a lease. By clarifying exactly what can be charged by the lessor (no more than the single holding rate), this bill would effectively see land tax charged as an outgoing. The consequences this could have on each individual lease are unknown. Whilst existing leases are exempt, nothing is mentioned about renewed leases. This bill, whilst it is well intentioned, does not address the original threshold issue that has arisen since the high-profile Buffalo Inn court case. It is the government's intention to conduct a comprehensive review of the act after the up-and-coming state election to deal with these issues the Hon. John Darley has correctly identified. Given the short time we have to debate the bill before us tonight, this would seem to be the most appropriate course of action. The Hon. R.I. LUCAS Legislative Council The Hon. R.I. LUCAS (22:46): I rise on behalf of Liberal members to indicate our position on the bill. I understand that there have been discussions between the shadow minister responsible, Mr Steven Griffiths, and I think also Liberal leader Steven Marshall. The Liberal leader, Steven Marshall, has provided me with a statement in terms of our position, which I will read onto the record. It states: The Liberal Party recognises the expertise on land tax matters of the Hon. John Darley and his efforts on this Bill regarding Retail and Commercial Leases and land tax being open to scrutiny and thank him for providing the briefing that he provided. This Bill was introduced in the last sitting week, so little time was available to the Opposition for consultation to occur. Contact was made with the Property Council of South Australia and the Australian Retailers Association. The Property Council stated they 'have long advocated for the ability of landowners to be able to pass on land tax to tenants through a clear and transparent process, and we strongly support amendments to remove the current prohibitions to do so', while also going on to say: 'We are concerned with the drafting of the Bill as it stands, we believe it will not achieve what it sets out to do. The issues resulting from the 2010 increase in the threshold as mentioned by the Hon. John Darley in his second reading speech are not addressed by the Bill.' The Australian Retailers Association noted to the opposition: 'It is our view that South Australia should be like the majority of other states where land tax is not a retrievable billable cost. It saves a lot of mucking around along with disputes. If it is not then landlords should factor these types of costs into their rents when they negotiate them.' The land tax impost created by 12 years of Labor policies has long been recognised as a disincentive to some in owning property. The Liberal Party is focused on policy that will address this. As such, the Leader of the Opposition has authorised that, if elected to government in March 2014, the Liberal Party commits to undertaking a formal review of land tax transfer for retail and commercial premises to tenants and will invite industry and interested persons to make submissions and consider legislative amendments. The Hon. J.A. DARLEY Legislative Council The Hon. J.A. DARLEY (22:48): I would like to reiterate and stress that my original and only intention for introducing this bill was to create transparency for tenants in retail and commercial premises. This bill was never intended to be a free kick for landlords to impose additional costs onto tenants, as I am well aware of the struggles that businesses, especially small businesses, face. This bill was intended to legitimise what many landlords have been doing since 2003, when land tax first emerged as a problem, and ultimately to expose the unreasonable impost that land tax has become. Over the past few weeks, I have consulted with both the government and the opposition, as well as tenancy groups, and I am concerned that there may be some misunderstanding about the intent of the bill. I hope that I have made myself very clear today that this bill is about transparency rather than adding an additional cost impost for small businesses. I have had discussions with both the government and the opposition about the need for a review of the Retail and Commercial Leases Act, and it is my understanding that they have both indicated their support for such a proposal. The act has become a dog's breakfast not only in terms of land tax but also with regard to the safeguards afforded to tenants and especially small businesses. I am confident that this review will have the support of the Small Business Commissioner, who is currently in the unenviable position of having to navigate through a 19-year-old act which is a complete mess. I will continue to push for this review to ensure that what is promised will come to fruition. Previously, retail and commercial leases were able to include land tax as part of the outgoings. This did not present too much of a problem, as land tax prior to 2003 was fairly insignificant. However, with the rapid increase in the value of land and little change to the land tax scale of rates, the amount of land tax payable simply became too great for landlords to absorb. As they were prohibited from openly passing on this cost to their tenants, many landlords merely recalculated rents to include this cost. The intention of my bill was to get landlords to be more transparent and disclose how much land tax was being passed on through hidden rent increases. This situation has arisen because the government is addicted to the revenue that the land tax cash cow generates for it each year. I have been very outspoken about the way that land tax has become uncontrollable and unmanageable. The government has been unwilling to review the way in which land tax is levied and has created a situation where a small taxpayer base is footing the bill for approximately 14 per cent of taxation revenue for the state. These taxpayers' cries for relief have fallen on deaf ears. The government's popular response is often that big businesses, such as landlords of retail and commercial premises, can afford to pay; however, we all know that these costs will be passed on to their tenants who, in turn, will have to increase the cost of goods or services to cover their own costs. Ultimately it is the consumer who pays, and it is no secret that many South Australians are already struggling with the cost of living. The government's attitude to hit the big boys is driving business out of South Australia. Having the highest land tax rates in the country provides no incentive for investment in this state. Land tax affects everyone, from the large landowners to the end consumer and everyone in between, and I urge both major parties to make a commitment to review this matter if they form government next year. I seek leave to conclude my remarks. Leave granted; debate adjourned.