Bills

Land Tax (Miscellaneous) Amendment Bill

Committee Stage

In committee.

Clause 1.

The Hon. C.M. SCRIVEN: Could the Treasurer advise why the government will not release the latest modelling it has on land tax changes?

The Hon. R.I. LUCAS: I am happy to respond to this question. As I have advised a number of members of parliament, including representatives of the Labor Party, the government has released the PricewaterhouseCoopers report and made it publicly available. I have outlined on a number of occasions the modelling approach that the Treasury officers adopted. They had access to the confidential tax details of land tax payers on the RevenueSA database. They then had access to the confidential information from the TRUMPS database operated by the Department of Planning, Transport and Infrastructure, and they also had access to information from ASIC in relation to companies registered with ASIC. As a result of that, they were able to cross-refence, do their calculations and make their estimates.

As a result of that—or at the same time—the government had commissioned PricewaterhouseCoopers to provide independent oversight of that particular process, and their report is publicly available. They have said, in broad terms, that the process that had been adopted by Treasury was reasonable and that there were no other alternative data sources, in their view, available to Treasury that they could have used to be able to make any better estimate of the information. They had oversight of the overall process.

The notion that there is some report called 'the modelling report' that provides all the details in relation to these estimates is a fallacy. We are not allowed to release the confidential tax details of taxpayers in South Australia; therefore, we cannot provide that to the Labor Party or other members of parliament and say, 'Here are the modelling details; this is how we have done it, and you can second-guess the calculations that Treasury has done.'

The only way anyone could second-guess it would be to have access to the same information that Treasury information have had access to. That is just not legally possible. It would not be ethically appropriate to release that sort of confidential tax information to members of parliament or indeed other independent bodies and organisations.

It is a nice debating point, in terms of accusing the government of saying that we have not released our modelling. We have released the results of all the modelling that we have done; it is publicly available. We have released the independent assessment of the appropriateness of the process that Treasury officers went through in terms of doing their estimates and their modelling. They undertook a rigorous review, and that report is publicly available as well.

We can continue to have the argument about, 'Why won't the government release the modelling?' but I can only indicate again, as I have just done, the reasons why we are not able to release the confidential tax records and details of taxpayers. We have released the details of the modelling that Treasury has done and they are the figures that we have put on the public record.

We have released an independent assessment by PricewaterhouseCoopers. As I said, they have indicated that it was a reasonable process. They had no criticism and, just as importantly, there were no other available data sources that Treasury should have used to produce any better estimate than the estimates Treasury has made of the modelling and the impacts of the proposed changes.

The Hon. C.M. SCRIVEN: Could the Treasurer advise, then, how many ownerships are impacted by the aggregation measures?

The Hon. R.I. LUCAS: Again, we have put this on the public record on a number of occasions. I have talked about three separate ownership categories. One ownership category is called individual. That is where I as an individual, or perhaps myself with my wife or myself with a business partner, are characterised as natural persons or individuals in that terms of ownership category. The second group is companies—the ordinary meaning of that is evident to everyone—and the third grouping is trusts. Again, we have had a lot of discussion about that third grouping.

In the first grouping, there is a total of approximately 52,000 individuals. Of those, just under 48,000 will be better off as a result of the government's package, which includes three elements, if you remember. There are the aggregation provisions, there is the increase in the threshold and there is now the reduction in the top rate and other rates as well. About 4,300 are worse off. That is the 92 per cent/8 per cent figure that has been oft quoted.

In relation to company groups (groups of companies) there is a ballpark of 11,000. Of those, 7,900, or 75 per cent, are better off, and 2,600, which is the 25 per cent figure, are worse off as a result of the total package of government changes. Again, those figures have been public for some time now and remain our best estimates.

The Hon. C.M. SCRIVEN: The Treasurer mentioned three categories of individuals, companies and trusts, but has not mentioned the figures for trusts.

The Hon. R.I. LUCAS: As the PwC report indicates, Treasury has line of sight of about 4,500 trusts. Treasury and PwC estimate that there might be approximately another 6,000 to 6,500 trusts that are not lodged with RevenueSA in terms of they do not currently pay land tax and therefore have no reason to be lodged with RevenueSA.

Of those, it is impossible, for the following reasons, to determine the numbers that will be better off or worse off. For example—let's assume there are 11,000 trusts—the vast majority of trusts, it is estimated, are what are known as discretionary trusts, and under the government's proposed model the trustee of a discretionary trust has two options. The trustee can choose to nominate a beneficiary, and if he or she has no other land in his or her name then the trust does not have to pay the 0.5 per cent surcharge and there is unlikely to be any negative impact on the individual beneficiary who has been so nominated.

One of the changes in this range of amendments that the council is going to be asked to consider is that the government has agreed with submissions made by a number of people that we should give those discretionary trusts an extra 12 months to nominate the designated beneficiary for land tax purposes. The original bill the government had was that that decision had to be taken by 30 June next year. The government has now agreed to submissions that we should give people an extra 12 months—so 30 June 2021—to nominate their designated beneficiary. The argument was that people should be given more time to make these sorts of decisions.

The issue of how many trusts will be better off or worse off will be dependent on individual decisions the trustees make, and we are just not in a position to be able to estimate what the percentage will be in terms of the decisions that trustees may well take, as I said, especially given that discretionary trusts are the overwhelming majority of the total number of 11,000 trusts in South Australia.

The Hon. C.M. SCRIVEN: As a rough number of ownerships, that comes to between 70,000 and 73,000 that will be impacted by the aggregation measures. Could the Treasurer advise the chamber how many of those are residential, how many are commercial, how many are industrial and how many are mixed?

The Hon. R.I. LUCAS: When the member says—whatever the number was—70,000 impacted by aggregation, the overwhelming majority of those are actually going to be better off as a result of the government's changes. It is not just aggregation, there are three elements to the package: there is cutting the rates, increasing the thresholds and the aggregation changes. So let us be clear in relation to this: whatever that number was, 70,000-odd, are not people negatively impacted by the government's proposed changes. We do not have the breakdown in relation to the number of industrial, commercial and residential, so I am not in a position to provide that information to the committee at this stage.

The Hon. C.M. SCRIVEN: Why not?

The Hon. R.I. LUCAS: I do not have that level of detail with me.

The Hon. C.M. SCRIVEN: To just go back to the Treasurer's previous point, the 70,000 to 73,000, acknowledging that there are roughly 6½ thousand who may or may not be impacted, that total figure and the figures the Treasurer was referring to, are they the number of ownerships impacted by aggregation only or the number impacted by all of the measures? If it is the latter, how many are impacted by aggregation only?

The Hon. R.I. LUCAS: I have made it clear on a couple of occasions that the numbers the honourable member is referring to are impacted by the government's total package. The government is looking at the impact of the total package on taxpayers, and it is appropriate that if an individual benefits from tax reductions and threshold increases that they also be included in any sensible analysis of the overall package the government has.

We are not breaking them down into what the individual impacts of individual sections of the package are; the government is only interested in what is the total impact on all taxpayers of the total package. What the individual elements might be is of academic interest, ultimately, to the government, because in the end—and I can assure the honourable member, having received many telephone calls, letters and emails and had many meetings—the concerns of individual taxpayers are what is the bottom line. It is the total package that they are concerned about, not the individual elements of it.

The Hon. C.M. SCRIVEN: Can the Treasurer advise how many properties are impacted by the aggregation measures as opposed to ownerships, which is what we were talking about a few minutes ago? How many properties?

The Hon. R.I. LUCAS: We are trying to find that number, but the best recollection is that the total number of properties—not the ones impacted by aggregation—is likely to be potentially around about 300,000, but a significant number of those are not impacted at all by any land tax because they have exemptions: primary production; they are below the threshold, which is currently $391,000; they might have other exemptions such as charitable; principal place of residence, I am reminded.

The question in relation to properties is much bigger than those that are ultimately impacted in any way by land tax because there are so many exemptions in land tax law, including charitable trusts, various other trusts and institutions, and various non-government organisations, etc. The total number of properties, which we will find at some stage, it might be 300,000 or something like that, whatever it is, but there is a much smaller number that are potentially impacted by land tax at all.

Regarding the issue in relation to the ones that are impacted by aggregation, as I said before, we are looking at the total package. It is those taxpayers and properties that are impacted by all of the measures: the land tax cuts, the rate cuts, the threshold increases and the changes to aggregation.

The Hon. C.M. SCRIVEN: That is my question: how many properties are affected by these land tax changes?

The Hon. R.I. LUCAS: We will have to take that question on notice and when we get an answer we will provide that. It is a significant number. It is nowhere near the total number of properties in the state because of the exemption reasons and the reasons that I have just given to the honourable member.

The Hon. C.M. SCRIVEN: Can the Treasurer advise when he expects to be able to provide the answer of how many properties are impacted by these land tax changes?

The Hon. R.I. LUCAS: I would expect that some time today, whilst we are debating the land tax bill, we will be able to give a rough estimate of the number of properties that might be impacted.

The Hon. C.M. SCRIVEN: Can the Treasurer also advise how many properties that are going to be impacted by the land tax changes are residential, commercial, industrial and mixed properties?

The Hon. R.I. LUCAS: No, we will not be providing that level of detail today to the committee.

The Hon. C.M. SCRIVEN: Why not?

The Hon. R.I. LUCAS: Because we do not believe it is important to the debate.

The Hon. C.M. SCRIVEN: Does the Treasurer think it is important to the debate to know how many individual renters, particularly those on low incomes, might be affected by the land tax changes; to know how many small businesses, because they are owners of commercial property, might be impacted by the land tax changes; or how many other businesses, because of their owning industrial property, might be impacted by the land tax changes? Is that what he is saying is not relevant to this debate, when we are talking about the economic sustainability of this state and he is saying that those things are not relevant to this debate?

The Hon. R.I. LUCAS: No, I am not saying that. Let's take the first point the honourable member makes in relation to rents. If 92 per cent of individuals are better off, if 75 per cent of company groups are better off, then there is no economic imperative or financial imperative for rents to increase at all. In fact, you could argue that there is an imperative for them to reduce rents.

The mere fact of knowing the number of industrial and commercial properties or residential properties does not answer the honourable member's question. It is a straw person argument, if I can respond to the honourable member. The mere fact of knowing the number of properties does not say anything about what the impact of rents will be. For example, if the overwhelming majority of individual property owners are going to have a benefit from the land tax changes then there is no argument at all about rent increases, so the honourable member's argument falls away immediately.

Some of the alarmist claims the honourable member and her colleagues have been making, and indeed some of the other opponents, are not capable of being proved. It is easy to make the claims, as they have been doing, but they are incapable of being able to prove the claims because the answers are that the overwhelming majority of people will be better off in relation to the land tax changes rather than worse off.

In fact, what the government has been criticised for, in what it is putting to the parliament, is that we have been too generous in terms of the response in relation to land tax reductions.

The Hon. C.M. SCRIVEN: The position of the Treasurer appears to be that he does not know how many people will be affected by aggregation specifically. He does not know how many properties will be affected by the land tax changes in general and he does not know how many of those are residential or commercial or industrial. Yet, he is expecting this chamber to rely on his assertions that this percentage of people will be better off, despite the fact that he cannot provide what is essentially some very basic information.

As to the number of properties that will be affected, it is quite bewildering to hear that the Treasurer does not have access to that information here on the day that we are debating this land tax package, the latest in many changes of the land tax package. We are expecting it to go to a vote quite soon and yet he does not know how many properties are affected by these changes. It seems absolutely bizarre that the Treasurer can expect that members of this chamber will vote on a package when he does not even know how many properties might be affected.

The Hon. R.I. LUCAS: That is not the case. As I have indicated, 92 per cent of individuals will be better off, 75 per cent of company groups will be better off. That is what is important in terms of this debate.

The Hon. C.M. SCRIVEN: Yet, the Treasurer cannot provide basic information on how many properties that is to be able to back up those claims. Some further information which would be of benefit is: how many ownerships, which will be impacted by these land tax changes, are regional?

The Hon. R.I. LUCAS: I do not have that sort of information or detail with me at the moment.

The Hon. C.M. SCRIVEN: Is it true that no modelling has been done on regional impacts of these changes?

The Hon. R.I. LUCAS: No.

The Hon. C.M. SCRIVEN: Again, that is amazing that the party that claims to care about the regions has done no modelling whatsoever on the impacts on regional areas.

The Hon. R.I. LUCAS: I said it was not true.

The Hon. C.M. SCRIVEN: So the Treasurer is now saying that modelling has been done on the impacts on regional areas.

The Hon. R.I. LUCAS: Have a look at Hansard and what your question was. I answered your question.

The Hon. C.M. SCRIVEN: I will ask a question again, since the Treasurer seems to be splitting hairs.

The Hon. R.I. LUCAS: No, I am not. I am answering your questions.

The Hon. C.M. SCRIVEN: Has there been any modelling done on the impacts of these land tax changes on regional areas?

The Hon. R.I. LUCAS: That is a different question to the one the member put earlier. The answer to that particular question is we have looked at the impacts right across the state—regional and metropolitan.

The Hon. C.M. SCRIVEN: Can the Treasurer indicate what the specific impacts are on regional areas?

The Hon. R.I. LUCAS: The numbers we produced are 92 per cent of individuals across the state—regional and metropolitan—will be better off; 8 per cent will be worse off. In relation to the company groups, 75 per cent of company groups will be better off; 25 per cent will be worse off. Bear in mind, of course, that the honourable member may or may not appreciate the fact that many in our regional communities have the benefit of longstanding land tax exemptions for primary producing land. So you will have a significant number of people in regional areas who are completely exempt, together with the usual exemptions for principal place of residence. Unlike the metropolitan area, there will be a significant number of people in regional areas who have farming operations who are land tax exempt for their primary producing land.

The Hon. C.M. SCRIVEN: How many commercial ownerships are there in regional areas?

The Hon. R.I. LUCAS: I do not have that sort of detail.

The Hon. C.M. SCRIVEN: Which leads me again to the key issue with this package which has changed so many times. If the Treasurer does not know how many ownerships are impacted in regional areas, how could he possibly say what the impact will be? He does not know how many ownerships there are. I assume from his earlier answer he cannot tell us how many properties in regional areas are impacted either. That comes back to the basic problem of the amount of information that is not available, either because it has not been released, or, if we are to accept on face value what the Treasurer has said, it is because it simply has not been done.

That is the basic issue that we, on this side of the chamber, as well as the crossbenchers, need to be taking into account when being asked to vote on this package and support this package because there is so much information that is either not provided or modelling has not been done or the information is not available. That is one of the basic problems with the package that the Treasurer is asking us to support. Could the Treasurer advise how much revenue is now estimated to be raised by the aggregation measures?

The Hon. R.I. LUCAS: I am prefacing my remarks by indicating that there is obviously significant revenue forgone through tax reductions and threshold increases. The publicly available information in relation to the increased revenue from the aggregation provisions, that estimate which has already been on the record for I think three months now, or whatever it is, is about $86 million.

The Hon. C.M. SCRIVEN: The Treasurer, I think, has anticipated my question. How much revenue is now estimated to be forgone by the changes to the land tax rates and thresholds?

The Hon. R.I. LUCAS: We have indicated, in my extensive closing in the second reading, that this committee and ultimately this chamber confronts two options at the moment. That is, the government's amended package, that it is proposed to be supported, will have a net cost to the budget of $189 million over three years. If the bill is defeated, the net cost to the budget will be $150 million over three years. So the difference between the bill passing or the bill being defeated is $39 million over three years.

The advantage, as I highlighted yesterday, of the bill passing is that we will have a fairer and more equitable system with the changes to aggregation, and we will have a new investment-attracting, job-creating top rate of 2.4 per cent instead of the 3.7 per cent. With all the other changes that are now in the package, if the bill is defeated it will still cost the budget $150 million over three years, but we will still have an investment-destroying, job-destroying 3.7 per cent top land tax rate and we will still have the unfairness of the existing aggregation arrangements that the Labor Party is staunchly protecting.

The Hon. C.M. SCRIVEN: Can the Treasurer be specific in terms of the question that I asked, which was: how much revenue is now estimated to be forgone by the changes to the land tax rates and thresholds—that specific figure?

The Hon. R.I. LUCAS: I cannot be any more specific than the net cost to the budget over three years is $189 million.

The Hon. C.M. Scriven interjecting:

The Hon. R.I. LUCAS: Well, that is the whole lot. That is what the net cost to the budget is. I am not sure what financial or economic school the Acting Leader of the Opposition attended, but the reality is that that is the net cost to the budget. With all the ups and downs, all the changes incorporated into the proposed bill, or if the bill is defeated, where we will be left, that is the net impact. I cannot be any more explicit and specific than that. It is a $189 million cost. If the bill is defeated, it is a $150 million cost over three years.

The Hon. C.M. SCRIVEN: The Treasurer is being specific in terms of the aggregation measures, that they will raise an additional $86 million. Why can he not be specific about the revenue forgone by the changes to the rates and the thresholds? They are essential parts of the package. Why can he not be specific about that measure?

The Hon. R.I. LUCAS: The broad figures are—you just have to work backwards from what the net cost will be. The impact of the various measures in the bill in terms of lost revenue must be significantly more than the additional revenue that you are going to get. So if you are getting around about $86 million a year and if the net cost to the budget is about $189 million—so that is about $60 million-ish per year over three years—then it is just the difference between those. In ballpark terms, it will be around about $140 million to $150 million a year in revenue being returned.

On the other hand, you are collecting around about $80 million to $85 million, whatever it is, $86 million, in terms of estimated collections from aggregation. The reality is that is largely academic. The bottom line is: what is the net impact on the budget? The net impact on the budget is that it will cost $189 million over three years. If the bill is defeated, it will cost $150 million over three years, so the net difference is $39 million over three years.

The Hon. C.M. SCRIVEN: Of that amount, what is the budget impact of the changes that are incorporated in this bill, not including the measures that were in last year's legislated changes?

The Hon. R.I. LUCAS: I refer the honourable member to the four previous answers that I have just given. That is the answer to that question.

The Hon. C.M. SCRIVEN: For clarification, the four previous answers did not include the legislative changes that were made last year; is that correct?

The Hon. R.I. LUCAS: I can offer no greater detail than what I have already said, that is, if this bill is passed, the cost is $189 million over three years. If the bill is defeated, we are left with the legislative changes from last year. So the honourable member does not understand the question that has been drafted for her. If the bill is defeated, we are left with already legislated changes from last year, and that is the $150 million over three years cost. If the bill is passed, we have a new set of circumstances, which is a cost of $189 million over three years.

The Hon. C.M. SCRIVEN: Could the Treasurer advise what the impacts will be for taxable ownerships at the threshold of $500,000?

The Hon. R.I. LUCAS: There are any number of answers to that question. It depends on how many properties the individual owns, what the ownership structure is, whether it is a natural person or an individual, whether it is a company or whether it is a trust. There is no one answer to that question: there are many, many answers, depending on the individual circumstances of the taxpayer.

The Hon. C.M. SCRIVEN: Can the Treasurer provide the answer for an individual, a natural person, for clarification?

The Hon. R.I. LUCAS: If it is an individual, and if he or she owns one property—and it is not their principal place of residence, because that is land tax exempt—then they will be paying less tax because the tax-free threshold is going to go up from $391,000 to $450,000. Whatever they were paying before, they will be paying less because they will now have a tax-free threshold of $450,000. They will only pay tax at 0.5 per cent on $50,000, whereas before they would have been paying 0.5 per cent on $109,000, so they will be paying less tax. They will be saying, 'Hallelujah! Thank you, government, you are doing a wonderful job.'

The Hon. C.M. SCRIVEN: All hail Mr Lucas!

The Hon. R.I. LUCAS: I don't know if they will say that.

The Hon. C.M. SCRIVEN: You wish. Could the Treasurer answer the same question in respect of $600,000?

The Hon. R.I. LUCAS: If we are again talking about an individual, and if we are again talking about the fact that it is not a principal place of residence, then it is exactly the same answer. We can do it for any number of figures that the honourable member wants to ask about, but it will be the same answer, that is, because the threshold is higher they will pay less tax and they will also say, 'Hallelujah, thank you very much' to the government. They certainly will not be saying thank you to Rob Lucas, I suspect.

The Hon. C.M. SCRIVEN: In the same set of circumstances where the taxable ownership is $1.2 million, could the Treasurer explain the impact?

The Hon. R.I. LUCAS: It is the same generic answer, that is, if it is an individual property and not their principal place of residence, they will have the benefit not only of the increase in the threshold from $391,000 to $450,000, which is what we are talking about, but also the significant benefit of the rate reduction from 1.65 per cent currently down to 1.25 per cent and then down to 1.0 per cent. It is the smaller mum-and-dad investors, as they have been so called by the people in this particular debate, who will benefit significantly from the tax changes because they get the benefit of the threshold increase and, because the rates at the lower levels have also significantly reduced from 1.65 per cent to eventually 1.0 per cent, they will benefit significantly.

They are families like the Deguglielmo family, who I have quoted in this place on a number of occasions. They are a couple whose form of superannuation was investing in a handful of properties in the north-eastern suburbs. That was their form of superannuation. They are currently paying tax at the aggregated rate. This is when they have a number of properties. The example I referred to earlier with the honourable member was just where it was a single property. In those circumstances, they will benefit significantly.

The Hon. C.M. SCRIVEN: Could the Treasurer advise for $1.25 million?

The Hon. R.I. LUCAS: It is the same answer.

The Hon. C.M. SCRIVEN: At $1.5 million?

The Hon. R.I. LUCAS: The same, or a very similar answer.

The Hon. C.M. SCRIVEN: Could the Treasurer clarify what he means by 'a very similar answer'?

The Hon. R.I. LUCAS: Everything I have just said will apply exactly the same; that is, if it is a single property, they will benefit from the threshold and the tax rate reductions on their $1.5 million property. If they are currently aggregated—I think the example we were talking about was a single property; let's leave it at that, that is the easiest example—they will benefit.

The Hon. C.M. SCRIVEN: Can the Treasurer advise for $1.75 million?

The Hon. R.I. LUCAS: Again, it is a very similar answer. The higher you go, the other reductions in the top tax rate, which previously 3.7 factored in at $1.3 million—so you are now getting into the group of the $1.5 million and whatever the last number was. We can go up in $250,000 increments for the rest of the day if you want to. The people who are above $1.3 million, these are the people in the past who were paying 3.7 per cent. They will now be paying 2.4 per cent and they will also have the benefit of the lower rates earlier. These are the people who will be jumping up and down and cracking open a bottle of Coca-Cola and saying, 'Good on the government for introducing these particular changes.'

The Hon. T.A. Franks interjecting:

The Hon. R.I. LUCAS: A bottle of Bickfords.

The Hon. C.M. SCRIVEN: I can see the Treasurer is looking forward to the great hailing of his genius. Could the Treasurer advise the impact at $2 million under the same circumstances?

The Hon. R.I. LUCAS: That is exactly the same answer. They would benefit also, single property, from the very significant reduction of 3.7 per cent down to 2.4 per cent. They would also have the benefits of all the other changes that I talked about earlier.

The Hon. C.M. SCRIVEN: And at $2.5 million?

The Hon. R.I. LUCAS: The same answer to the $2 million example.

The Hon. C.M. SCRIVEN: And at $3 million?

The Hon. R.I. LUCAS: The same answer as the $2 million and the $2.5 million answer.

The Hon. C.M. SCRIVEN: At $4 million?

The Hon. R.I. LUCAS: At least the increments are getting bigger. They started off at $100,000 and now they are going up by $1 million. The same answer as the $3 million answer, or whatever it was. I have lost track of the number. Whatever the last answer was, it is the same answer.

The Hon. C.M. SCRIVEN: What about at $5 million?

The Hon. R.I. LUCAS: The same answer as $4 million and $3 million.

The Hon. C.M. SCRIVEN: So we certainly have a bit of a bidding war here, it would seem, in terms of those who are going to be better off under this package, and it is certainly not those middle ground mum-and-dad investors, but we are looking at those higher levels.

The Hon. R.I. LUCAS: No, that is not the case because when the member first started asking questions at $500,000 and then up to $1 million, etc., as I indicated, they all benefitted as well.

The Hon. C.M. SCRIVEN: But not to the same degree.

The Hon. F. PANGALLO: Treasurer, can you take us through the trust thresholds from $25,000 through to $1.098 million? We know $25,000 is zero. What about $25,000 to $40,000?

The Hon. R.I. LUCAS: For 2021: for $25,000 to $450,000, it is 0.5 per cent; for $450,000 to $755,000, it is 1 per cent; for $755,000 to 1—

The Hon. F. PANGALLO: Treasurer, can you give us the figure that will be paid as well?

The Hon. R.I. LUCAS: You want a percentage?

The Hon. F. PANGALLO: I have the percentage, but what figure would it be?

The Hon. R.I. LUCAS: It will vary. If you have a classification of $450,000 to $755,000, it will obviously change depending on the value, whether it is $450,000 or $750,000, because the percentage stays the same within that category. So there is not one number at those lower levels. Do you understand? There is not one number that applies to the whole category; it is a percentage that applies to the values within that category.

The Hon. F. PANGALLO: For instance, for $1.098 million or greater the rate would be, what, 2.4 per cent; is that correct?

The Hon. R.I. LUCAS: Yes.

The Hon. F. PANGALLO: Is it conceivable that the tax bill could be more than $12,000; is that correct?

The Hon. R.I. LUCAS: With the amended package, at $1.098 million it would be $11,303, but obviously, as I said earlier, as it goes higher than that there is a higher tax rate that is paid. What the member needs to bear in mind is what I said earlier, and that is: if you are in a discretionary trust you have the option of not paying the surcharge. The overwhelming majority of trusts in South Australia are discretionary trusts—I think he has heard me say that—and so with a discretionary trust you have the option of not paying the surcharge.

What the honourable member is talking about here is those people who choose or cannot nominate a designated beneficiary under the terms of the proposed legislation and avoid the payment of a surcharge. The member needs to bear in mind that not all trusts pay these particular rates or the surcharge rate. Many of them will have the option of not paying that surcharge in certain circumstances, which are outlined in the legislation.

The Hon. F. PANGALLO: Just to be clear, at $1.098 million or greater it will be more than $11,000?

The Hon. R.I. LUCAS: Only if they are paying the surcharge. If they are not paying the surcharge, it will not be.

The Hon. F. PANGALLO: Did the Treasurer write to the Motor Trade Association on 19 November advising them that discretionary trusts would be capped at $6,500?

The Hon. R.I. LUCAS: I would have written, depending on the stage of the debate, to a number of stakeholders in relation to what the extent of the surcharge would have been at that particular time of the debate. What I do want to place on the record—because there has been some confusion about this—is that the overview document published on the publicly available YourSAy website in September of this year said:

Where the surcharge is applied, it will be levied on the full value of the land (no surcharge-free threshold). The value of the surcharge will be capped for land exceeding the top marginal tax threshold.

At the time of the debate, when I wrote to the to the Motor Trade Association or whatever it is, the top marginal tax threshold may well have been $1.1 million. What is now proposed is a top marginal tax threshold. It was originally going to be $1.6 million, so anyone who wrote to me after the debate, when it was $1.6 million, would have got a different capped top amount. Now that the proposal is $2 million—completely consistent with what was announced and publicly available on the YourSAy website—the value of the cap is capped at the top marginal tax threshold.

What I have actually said to the Motor Trade Association, and to many others, is that the government had the option of choosing the model used in Victoria, which is similar to what we have chosen, or the alternative model, which is the Queensland model, whereby the 0.5 per cent is never capped. So if you have $100 million in property held in a trust, you are paying that 0.5 per cent, not at the capped rate but completely uncapped on the $100 million.

If I were a greedy, rapacious Treasurer, I would have jumped into that with my hands in the air, yelling, 'Halleluiah!' But we did not believe that that was a reasonable response, albeit another government has adopted that particular response. We chose the model that was better for taxpayers; that is, it was capped at whatever the top marginal tax threshold was going to be. At various stages in this debate, it was $1.1 million, then $1.6 million, and now it is $2 million.

At varying stages, there would have been letters or discussions where the capped amount—I think the capped amount that was originally flagged was $5,490, and then to $6,000. Now at $2 million, in the first year that it occurs, which is 2022-23—so it does not happen straight away—that capped amount will change as the top threshold changes.

The top threshold for the next year is $1.35 million; for the following year, it is still $1.35 million; and then in 2022-23, it becomes $2 million. In the first two years, the capped amount will be lower than that; it is around $6,500 for the first two years, at $1.35 million. It is only when, in two years, the top marginal tax threshold jumps significantly from $1.35 million to $2 million that the capped amount goes.

As I said, the government had the alternative option of the Queensland model, which is completely uncapped, to take 0.5 per cent or its equivalent over the whole value of the property. We did not choose to go down that particular path, as attractive as it might have been to Treasury.

The Hon. F. PANGALLO: Can I just take you back. If somebody had a single property with a land value of, say, $500,000, their tax would be $250 per year? Is that correct?

The Hon. R.I. LUCAS: Yes, we are assuming.

The Hon. F. PANGALLO: And if a person owned two similar properties and they were valued at $500,000, what would they pay?

The Hon. R.I. LUCAS: If there were two separate properties at $250,000 each and they add up to $500,000—if they are owned by Mr Frank Pangallo, an individual, then the tax is exactly the same: $250.

The Hon. F. PANGALLO: But if a person had two properties, would the tax be, say, $4,000? No?

The Hon. R.I. LUCAS: Mr Chairman, I am not sure if the member wants to change the question, but the question he has put to me is that: if the individual—let's say it is the Hon. Mr Pangallo—has two properties at $250,000 each and they add up to $500,000, do you pay the same amount of tax, $250, as if you own one property at $500,000? This is, of course, assuming they are not your principal place of residence and are investment properties. So it does not matter. If you own one property for $500,000, or two properties, in your own name, investment properties, adding up to $500,000, then you pay the same tax.

The Hon. F. PANGALLO: If a person had four properties, what would they pay in tax?

The Hon. R.I. LUCAS: Four properties adding up to what?

The Hon. F. PANGALLO: Four properties by $500,000.

The Hon. R.I. LUCAS: So adding up to $2 million?

The Hon. F. PANGALLO: Yes. Would it be—

The Hon. R.I. LUCAS: They would pay a lot more tax.

The Hon. F. PANGALLO: Yes. How much would they pay?

The Hon. R.I. LUCAS: I am not suggesting these are your personal circumstances, but if you were this individual you would be saying, 'Hallelujah! Thank you, the government. There's a big tax cut coming.' Currently, in the circumstances that you have identified, if you as an individual own four properties at $500,000, which is $2 million, under the current Labor government scheme—which they are staunchly defending, and you might be as well—you would be paying $39,070 tax. Under the proposed amended scheme, you would be paying $26,450. You would be looking at a $13,000 reduction. It might even be enough to get you to change your vote and support the bill, the Hon. Mr Pangallo.

The Hon. F. PANGALLO: Can I just give you this scenario? Somebody who had four properties would be paying nearly $20,000, or more; you are saying more. Why is it that the multiple property owners have to pay far more for each property rather than the one single property tax that is applied?

The Hon. R.I. LUCAS: In the examples the honourable member has just outlined, they do not. It may well be that the honourable member needs to ask me a different question, but in terms of the question that the honourable member is asking, if an individual such as the Hon. Mr Pangallo owns one property worth $500,000, or two properties worth $500,000 in total, he is treated the same in terms of the tax. If he has one property that is worth $1 million, or two properties that are worth in total $1 million, then he is taxed the same.

It is not as the honourable member believes it to be. If that is his understanding of how the land tax system and the changes are, then he is not understanding how the current land tax system works and indeed the significant benefit, which is the reason the government is saying, in all the examples the honourable member has indicated, that these are the individuals, the 92 per cent of people, who are going to be better off.

These are individuals who have properties, or multiple properties, in the examples he is talking about, who are currently paying tax at the aggregated rate and who, under the government's proposed changes, will see significant benefits. These are the mum-and-dad investors and others at the lower level who have not been making changes to their structure in terms of companies and trusts. They are individual. They own two, three or four properties. They add up to $1 million or $2 million. At $1.3 million and above they are paying 3.7 per cent land tax, and we are going to drop it to 2.4 per cent.

With the changes that the Hon. Mr Darley has negotiated and the government has agreed to, even those thresholds on the way up, between $750,000 and $1.1 million, will be paying 1.0 per cent instead of 1.65 per cent. So they have a cascading benefit in terms of lower tax. That is why we say to the Hon. Mr Pangallo and others that 92 per cent of individuals are going to be better off and 8 per cent are going to be worse off. I encourage the honourable member to keep raising the sort of examples he is raising because every one of his examples is in this 90 per cent of individuals who are going to be better off as a result of the government's changes. That is why we urge the parliament to support these reforms—because these mum-and-dad investors are going to be better off as a result of the changes.

The Hon. F. PANGALLO: So let us go to the 8 per cent that are going to be worse off. In your latest version of the tax you are offering these rebates. How is that going to work? How are you going to determine who qualifies for what?

The Hon. R.I. LUCAS: I outlined in the closure to the second reading the parameters of the scheme. It will be an ex gratia scheme. Individuals who believe they are eligible for the scheme will need to make an application by 31 March of each year. The bills are normally received in and around about October, November-ish, so they will have a period of five or six months, depending on whereabouts they are in that cycle, to make a judgement call as to whether or not they believe they are eligible.

As I outlined in the statement to the parliament, those whose changed land tax bills as a result of the government's package of changes lead to an increased bill of more than 2½ thousand dollars will be eligible. Those who have small increases in land tax bills, less than 2½ thousand, will not be eligible for this transition fund over three years.

At the big end of town, if your tax bill is increased as a result of these changes by more than $102,500 you get no benefit at all. So at the big end of town; contrary to the claims that are being made that this was targeted to help people at the big end of town, this is targeted to those who are at the lower end of the scale, albeit some will be significant property holders and investors. So anyone whose tax bill, as a result of these changes, for the properties they held at the time the bill was introduced—so you cannot keep adding new properties in as we go along—will be eligible for this particular scheme.

In the first year the potential reduction in your bill is 50 per cent, up to that maximum; in the second year it is 30 per cent; in the third year it is 15 per cent; and by the end of the third year you are fully exposed to the new scheme arrangements. Part of the argument for this, which we have accepted—and either Anglicare or one of the non-government organisations I read on the record yesterday supported this provision—is that it gives those who are impacted by the government's changes up to three years to restructure or rearrange their affairs should they so choose.

The Hon. F. PANGALLO: I note that the Treasurer has described it as an ex gratia scheme; is that correct? Can you just give me an expansion of what an ex gratia scheme entails?

The Hon. R.I. LUCAS: We have any number of ex gratia schemes at the moment—I am not sure what the number is—under tax law, not just land tax law. It is essentially a scheme that provides rebates or concessions in a variety of defined circumstances. I am reminded the former government's Job Accelerator Grant Scheme was an ex gratia arrangement. I am forever being asked for ex gratia arrangements under the film production and visual effects provisions of the Payroll Tax Act, where there is an ex gratia arrangement.

There are any number of arrangements in tax law, not just land tax law, where there are ex gratia schemes in relation to the provision of either concessions or benefits to individuals who might qualify for the terms of that particular ex gratia scheme. Ultimately, it is a decision in most of the cases for the Treasurer—not just me, but whoever the Treasurer is. So whomsoever shall hold the position of Treasurer ultimately makes the final decisions, but treasurers abide by the terms of the ex gratia arrangements.

The Hon. F. PANGALLO: As you mentioned, Treasurer, there are several of these schemes in operation. Can you tell us if this particular scheme will be subject to tax being paid on it?

The Hon. R.I. LUCAS: My advice is that this is a reduction in the amount of tax that is payable over the three-year period and therefore, in those circumstances—I presume the member is talking about commonwealth tax—there is no commonwealth tax payable on that.

The Hon. F. PANGALLO: Just to be quite clear: unlike one of these many schemes that the government has been operating—like ex gratia payments to the taxi industry where 50 per cent went in tax—you are saying that this will not be subject to any commonwealth tax requirement?

The Hon. R.I. LUCAS: The taxi scheme—whatever that was—was a creation of the former government and the former treasurer. I do not have the details in relation to the arrangements there so I cannot assist. I can only share the advice that I have been given in relation to the member-specific question about this ex gratia scheme, and that is my advice. I have shared it with the honourable member.

The Hon. F. PANGALLO: Just to be clear: you are saying that it will not be subject to any commonwealth tax requirement to be paid?

The Hon. R.I. LUCAS: I am saying that I have been advised that that is indeed the case.

The Hon. F. PANGALLO: Can the Treasurer tell us when the parameters of the scheme will be finalised, when will they be made available and how will they be made known to affected parties?

The Hon. R.I. LUCAS: The parameters have been made available to the public because I put them on the public record yesterday. If the bill is defeated there will be no useful purpose in further advertising or publishing or communicating the scheme because it will not exist. If the bill passes the parliament today, then RevenueSA, as expeditiously as possible—but it will take a little bit of time—will produce the final wording of that. It will then be available on the RevenueSA website. If the bill passes today, we will be clearly looking next year in terms of a communication program.

There has been a lot of unnecessary concern raised. I am sure the honourable member would appreciate that many of us have been contacted by people who only own their family home and who think that somehow the nasty Treasurer in particular, and the nasty government more generically, is going to increase the land tax on their family home even though they are completely exempt. There has been unnecessary concern so there will have to be a communication program directly to land tax payers and those who are affected.

In relation to the information we provide to land tax payers next year, whilst we have not finalised this, we would not only put it on the website but we would make information available to individual taxpayers to say, 'If you qualify in these circumstances you have this information provided to you. Go to the RevenueSA website and contact this particular number to get further information.' Again, we have not gone through the details of this yet because it is academic until or if this bill passes the parliament today, then we would contact a lot of the professional organisations such as accountants and others who, sadly, in many cases do not understand the complexity of land tax law.

We would want to make them aware of the availability of this particular scheme, the new arrangements and what the impacts might be on their clients, and we would look at an education program or a communication program for some of those professional associations. That would all be part of what the government would do if the bill were to pass the parliament.

The Hon. C.M. SCRIVEN: How much will it cost to administrate this compensation scheme? What will be the cost of the education and communication that the Treasurer has just outlined?

The Hon. R.I. LUCAS: The very quick estimate that we have done is that the administrative costs, bearing in mind it is for three years, would be about $300,000 to $350,000 a year. It is a complex scheme. There will be a lot of manual work that will need to be done by officers and there will be some set-up costs as well; we are still settling those. Those set-up costs might be as much as half a million dollars or so. If the bill is actually passed and becomes law, we will obviously do final estimates. Treasury, I am sure, will work to keep whatever admin costs there are as slim and mean and lean as possible.

The Hon. J.A. DARLEY: I would assume that when the 2021 accounts go out, RevenueSA would include some information on the account about the rebate scheme.

The Hon. R.I. LUCAS: I did not hear the last part.

The Hon. J.A. DARLEY: When the 2021 land tax accounts go out, I would assume RevenueSA would include information on the account or with the account about the scheme. I think it would be almost possible for the system to identify which accounts are affected.

The Hon. R.I. LUCAS: The answer to the question is when the 2021 accounts go out, because this will be a three-year scheme, and in the subsequent years, we will provide that sort of information, probably not on the account itself but it will be an attachment or a leaflet or a brochure or whatever it might happen to be. The safest method would be to provide it to everybody, rather than trying to identify the ones who might need it and those who might not. That would appear to be the safest method.

The honest answer is, if the bill passes the parliament, we will get into the detail. There is a clear commitment from the government and a recognition that there is a lot of communication that needs to be done in relation to settling down those many thousands of people who are completely unimpacted by the proposed changes, or what might then be the actual changes, and then for those who are impacted to provide as much assistance, communication and information as possible to them to make sure that they are aware of this particular scheme and, if they are eligible, to avail themselves of that particular scheme.

The Hon. F. PANGALLO: Treasurer, you can be assured, even as an opponent of the tax, I will not categorise you as a nasty Treasurer. Can I ask you to go back to the response you gave the Hon. Clare Scriven in relation to the set-up of the unit that would collect the new taxes and set them in train. Is this correct: you are saying it could be less than $1 million to set it up?

The Hon. R.I. LUCAS: Let's be clear. The question from the Hon. Ms Scriven was not about the set-up to collect the new tax. It is about the arrangements in relation to the people who will be eligible for this transition fund for a three-year period. So in terms of collecting the tax and implementing it, that is RevenueSA's job. We have lots of people in RevenueSA and they will just have to do that particular work as part of their ongoing work.

The transition fund is new and it is going to require a lot of manual work from individual officers, and for a three-year period we will require additional resources. That was the answer to the question; that is, in terms of an ongoing operation or additional cost, the initial estimate is about $300,000 to $350,000 in terms of additional people and operational costs to manage the complexity of the transitional fund for a period.

We think that is an investment well worth making in terms of assisting those people who are impacted, many of whom the Hon. Mr Pangallo has been representing in parliament in providing them with the opportunity for some assistance over a three-year period as they make decisions about what they want to do for the future.

The Hon. F. PANGALLO: Has Treasury and Finance done modelling on the cost of this new regime and collecting? Is there modelling on how much it is actually going to cost once and if this is passed?

The Hon. R.I. LUCAS: I refer the honourable member to this year's Budget Measures Statement in this year's budget. The costs are outlined in that in terms of, not the impact of the transition fund because that is a new issue that we are separately discussing, but in relation to the new arrangements. For the operating expenses for 2019-20, the estimated increase is $1.2 million, approximately $1.7 million the following year and $1.6 million, dropping slightly, in the following year. By the fourth year, it is nothing.

There are transitional costs in terms of implementing the overall system, which are three years, and by 2022-23, compared to this year, there is no additional ongoing resource required, so for three years in terms of setting it up, getting it all operating and the system changes. There are also some investing payments as well, but they are in the first two years. By 2022-23, there is no ongoing estimated cost to Treasury and Finance of the new land tax arrangements as opposed to the transition fund, which is again separate but still only a three-year cost for the transition fund.

The Hon. C.M. SCRIVEN: I want to return to the questions about the cap and the answers the Treasurer gave a little earlier, to clarify my understanding. Could the Treasurer advise, if he recalls the examples that were given at the time of someone who had land holdings of $2 million, he said that in the first or second year—I am not sure which—the land tax would be $6,500 but not what it would be in the years after that, so the ongoing figure. Can he clarify that for me?

The Hon. R.I. LUCAS: In 2022-23, when the top threshold goes to $2 million, the capped amount of the surcharge is $9,165. To repeat what I said to the Hon. Mr Pangallo, that is if you are in a trust and you have not nominated a designated beneficiary under the terms of the discretionary trust. If you have not taken up that particular option or if you cannot, then that is the capped amount. In the following years, it goes up at the indexed rate as the $2 million increases because, as the member knows, the thresholds are indexed. From 2022-23, which is the first iteration of the $2 million top tax threshold, it is $9,165 and it is capped at that particular level, as was outlined in September on the YourSAy website.

The Hon. C.M. SCRIVEN: Thank you for that clarification. In the same circumstances but with landholdings of $200 million, what amount would be payable?

The Hon. R.I. LUCAS: My adviser was trying to tell me that someone's tax bill was $39 million. I just said, 'I don't think so.' I think he is hopeful. Just going back to the $2 million example, it is a similar question to the Hon. Mr Pangallo's, in part. Whilst the surcharge applies, someone who owns $2 million in property in a trust is benefiting at the same time from the massive reduction in the top land tax rate, from 3.7 per cent down to 2.4 per cent, and the other tax changes.

To give an example, even with the payment of the surcharge at $2 million, that land tax payer would be paying $32,950 under this proposed bill. Under the former arrangements, that taxpayer would be paying $39,000. Even with the payment of the surcharge, people do not realise that, yes, they are paying the surcharge—that is, assuming they do not pick up the designated beneficiary option—but they are also benefiting from a massive reduction in the top rate of land tax of 3.7 per cent to 2.4 percent. In that $2 million example, their payable land tax has actually dropped by $7,000, even with the payment of the surcharge. Was the next question the $5 million one?

The Hon. C.M. SCRIVEN: $200 million.

The Hon. R.I. LUCAS: There is a simple answer for the surcharge: it stays the same. In that year, it would be $9,165. That is the point that I was making earlier. If we had been greedy and rapacious like Queensland, we would apply the 0.5 per cent to the $200 million, so we would have a bucketload more money coming in than $9,100. We have capped it at the top threshold, which is similar to Victoria, and that is in the interest of the taxpayers. The alternative was to do the Queensland model, which is to have it completely uncapped. In the $200 million example that the member has kindly given us, they would be paying 0.5 per cent on everything up to the $200 million, and it would be significantly more than $9,100.

The Hon. C.M. SCRIVEN: To clarify, when the Treasurer says he has put this cap on the surcharge in the interest of the taxpayers, what he is saying is that it is in the interest of the taxpayers who own, for example, $200 million, as opposed to the interest of the taxpayers who own only $2 million. They will be paying the same amount in the surcharge in spite of vastly different landholdings; is that correct?

The Hon. R.I. LUCAS: No, it is not correct. As I just indicated in relation to the $2 million example, that individual will still be better off in paying less land tax. I think the figures were $39,000 under the old arrangements and $32,000-ish under the new arrangements. So they are actually paying less land tax.

The Hon. C.M. SCRIVEN: My question was in regard to the surcharge. They would be paying the same surcharge, which I think is what the Treasurer has said. Can he provide what the difference in land tax under the two regimes would be for the $200 million landholder?

The Hon. R.I. LUCAS: No, in terms of preparation for today, we have done examples up to $5 million, or whatever it might happen to be. We have not gone up to $200 million. If the import of the honourable member's question is: should we have adopted the Queensland model and had 0.5 per cent on everything above and not have it capped, well, that is an interesting position. I would invite the honourable member to prosecute that in the public arena.

If that is the policy of the Australian Labor Party, I will be happy to help publicise that the Labor Party is opposed to capping the surcharge, which the government has done and which Victoria has done. New South Wales is not exactly the same, but it is similar. The one state that does have it uncapped is Queensland. We have chosen the model that actually produces less revenue for Treasury and assists taxpayers.

The Hon. F. PANGALLO: There is a provision in the proposed legislation for a review. Can the Treasurer explain how that review will work and who will actually be on that review?

The Hon. R.I. LUCAS: Thankfully for everyone who is involved in this particular debate, that will be a decision for the government of the day and the Treasurer of the day. It is post the 2022 election, so if the honourable member and others have their way and there is a new government elected, different to the current government, then whichever that government is and whoever the Treasurer is, they will have to, with their cabinet, make a decision.

What is required in the legislation is that it has to be independent. It is not to be conducted by Treasury, so it will have to be someone who fits the definition of 'independent'. There are a number of respected independent organisations that one could immediately think of, but I do not think it is productive to publicly nominate people. Ultimately, it is not a decision for me to take at this stage, other than it is my view that it should be completely independent from Treasury, and the terms of reference are as we outlined; that is, all of the changes that have been implemented in last year's budget and this particular tax change bill should be the subject of that independent review, to be conducted by whomsoever is fortunate enough to be elected in 2022, and the information should be made publicly available.

The Hon. C.M. SCRIVEN: Can the Treasurer advise what revenue the Department of Treasury and Finance estimates they will receive from the aggregation of mining tenements and oil fields or oil wells?

The Hon. R.I. LUCAS: No, I am not in a position to provide that level of detail.

The Hon. C.M. SCRIVEN: Is the Treasurer saying no modelling has been done on the impact on the mining industry or the oil industry?

The Hon. R.I. LUCAS: I just do not have that level of detail available to me at the moment. The member would also need to, I think, be more specific in terms of the ownership structure of these. Ultimately, land tax is payable by the owners of the land. I am not in a position to give advice in relation to the tenements or leasing arrangements of mining companies, or exploration rights or whatever it might happen to be. Whatever the laws of the land are in terms of land tax would be applied to all industries if they apply to them, unless there is a specific exemption. I indicated earlier that primary production obviously is the subject of a specific exemption, but that sort of detail we do not have available to us here.

The Hon. C.M. SCRIVEN: Can the Treasurer advise how DTF calculates the value of tenements for either gas wells or oil wells?

The Hon. R.I. LUCAS: That is not the sort of level of advice that I have available to me here. DTF and RevenueSA comprise many people, certainly beyond the two very capable officers that I have here. We do not have all the information, such as that sort of technical detail, available for this particular debate today.

The Hon. C.M. SCRIVEN: To clarify, the Treasurer cannot indicate, in any way shape or form, what the impact will be on the mining industry or the gas industry of our state—two very important industries for our economy?

The Hon. R.I. LUCAS: Only in the general sense, and that is that 92 per cent of individuals and 75 per cent of company groups are going to be better off as a result of the government's arrangements. In relation to companies, which are more likely to be the mining industry, it will depend very much on whether they are in the majority, which is the 75 per cent, or the minority, which is the 25 per cent, and that depends on a case-by-case basis as to how they have structured themselves and how they have gone about their business in the state. There is nothing that I am aware of that would make that particular industry sector significantly different in terms of more company groups being likely to be benefit rather than losing from the new arrangements.

Clause passed.

Progress reported; committee to sit again.