I am delighted to rise in support of this bill, which provides for some very important reforms to the taxation landscape for commercial and industrial property in Victoria, namely moving away from stamp duty towards a more efficient annual tax for these properties. This is quite a moment in history, a moment to be acknowledged, because in bringing forward this bill we are the first government in Victoria’s history with a plan to abolish stamp duty on commercial and industrial properties in this state. It is something which has been spoken about for a very long time, and indeed reforming stamp duty, as others have said, has been recommended by numerous inquiries over recent years, including the Henry tax review, the Productivity Commission and the Grattan Institute. But of course as a government of action it will be the Allan Labor government to deliver it.
On the surface of it taxation can seem like a rather dry topic to some, but one of the more appealing parts of our roles as parliamentarians is delving into policy spaces and discourses which we may not otherwise. For me taxation is one of these, and the more I learn, the more appreciation I have for the meticulous work of our outstanding Treasurer of Victoria. With the sharpest of analysis, our Treasurer must navigate the pull and thrust of markets, investments, interest rates and the potential for far-reaching impact with changes to our taxation system. In this case, with this bill we are looking at transformational reform. This is not a simple adjustment to the tax settings, it is a completely different way of taxing commercial and industrial property. The aim is to support businesses to grow and to expand, because supporting businesses to thrive is one of the absolute priorities of our government and my own work as the member for Northcote. On any given day commercial and industrial trade is buzzing across my electorate: up and down High Street, through Westgarth Village, Ruckers Hill, Northcote, Thornbury and Preston South, up Plenty Road or down in Fairfield Village, tucked into Miller and Gilbert streets, along Heidelberg Road or across the industrial warehouses of Thornbury, Preston and Alphington. Our suburbs are a hub of activity, bringing jobs, productivity and economic opportunity to not just our suburbs but the state of Victoria.
It is fair to say, though, that they have faced significant challenges over the last few years. When we all stayed home to protect each other, trade became difficult, workers struggled for income and business owners battled with the unknown. At that time I made it my mission to do everything in my power to push for more and better supports for our local businesses. In this place I stood up to ensure that as many businesses as possible were made eligible for our relief grants, including the numerous brewpubs like Moon Dog World, 3 Ravens and Tallboy & Moose in the inner north, which originally were excluded, and bespoke support for our many great music venues that were under immense stress. We hosted business round tables with multiple ministers so our local traders could relay directly to decision-makers the pressures they were facing, and at the time we spoke a lot about how we would revive and revitalise our business precincts and help them to bounce back after such a tough period. Out of these early conversations were born two very important local festivals, The Eighty-Six and Northcote Rise, both one-of-a-kind festivals with a unique inner-north flavour, bringing tens of thousands of visitors to our suburbs, creating a groundswell of economic activity and raising the profile of Northcote. The Eighty-Six music festival alone drew an audience of 29,000 and delivered $4.9 million directly into our economy, resulting in a multiplied impact of $14.9 million. Over 600 musicians and DJs were engaged, over 65 music venues and over 200 small businesses – an utter triumph for our creative and small business ecosystem. I mention this because it goes to the priority and the emphasis we put as a government on supporting and investing in our state’s future and our economy – and it is working.
Sitting suspended 1:00 pm until 2:02 pm.
Business interrupted under standing orders.
Where we left off just before lunch was that I was talking about our government’s investment in the future of our state and our economy and the fact that it is working. Victoria’s robust economy has once again recorded Australia’s strongest jobs growth over the past year, delivering the lowest unemployment rate of all of the states. Since November 2014 our economy has generated almost 800,000 new jobs, including more than 170,000 jobs in regional Victoria. We will keep working to boost Victoria’s economy with targeted industry investments to drive innovation, secure our supply chains, support businesses and back our regions.
This reform to abolish stamp duty is a key part of that work. Currently when you buy or acquire a commercial or industrial property in Victoria you pay land transfer duty, also called stamp duty. Stamp duty adds to the cost of purchasing property. When applied to commercial and industrial properties it discourages businesses from investing, expanding or relocating their operations, impeding growth and productivity. The changes contained in the bill address this problem by abolishing stamp duty for commercial and industrial properties that are sold after 1 July 2024, with land transfer duty to be replaced for these properties by a new commercial and industrial property tax after 10 years.
Just to be really clear on how this works: if a commercial or industrial property is contracted on or after that date – at settlement – a 10-year transition period will commence for that property. Additionally, at settlement the purchaser will have a choice to either pay the property’s final land transfer duty liability as an up-front lump sum or finance the land transfer duty through a government- facilitated transition loan, allowing them to make annual loan repayments over 10 years. The new tax will start 10 years after the initial transaction regardless of whether the property has been transacted since. It will be set at a flat 1 per cent of the property’s unimproved land value.
Economic modelling suggests that after 40 years this reform will have added 12,600 jobs to Victoria’s economy and will have increased the size of the Victorian real economy by a cumulative $50 billion in net present value terms. There are approximately 265,000 commercial and industrial properties in Victoria, so removing up-front costs on these types of purchases will accelerate business growth and boost jobs. It will mean that businesses can make that decision to move into a larger warehouse, for instance, to grow their workforce, to invest in better machinery or to refurb their space. Quite simply it gives business owners more choice and more ability to take that next step in their business journey.
And it is not just us saying so. As others have quoted, but for the benefit of my community in the inner north, Paul Guerra, CEO of the Victorian Chamber of Commerce and Industry, did comment that:
This is exactly the type of progressive tax reform that is required to free up stamp duty charges which will accelerate building upgrades, stimulate investment in commercial property and free up more capital.
Importantly, this change is designed to happen gradually over time as properties change hands, and it is revenue neutral – not an increase, as those opposite would have us believe. It simply replaces the lump sum stamp duty, which is a burden and an inhibitor to business growth.
It is important to note that the existing concessions and exemptions available for land transfer duty on commercial and industrial property will continue to be available when the reform commences, and that includes exemptions for transfers on deceased estates, a transfer to a spouse or a partner and purchases by charities and friendly associations or indeed the concessions for properties purchased in regional Victoria for commercial, industrial and other industry purposes.
These reforms are not done in isolation; they are delivered in the context of our broad suite of reforms to make things fairer for businesses, not least of which is the increase to the payroll tax threshold. Payroll tax is something I have spoken to many businesses about in my community, and the message has been loud and clear that the threshold is too low. So to better support small businesses across our state, from 1 July this year we will be raising the tax-free threshold to $900,000, with a further increase to $1 million from 1 July 2025. This is going to have a massive impact. We are also cutting the cost of running a business further by abolishing business insurance duty, becoming the first state in Australia to do so.
As the member for Northcote, I will continue to stand up for our local businesses in the inner north, and I described them in detail earlier in my contribution. From our shopfront traders right through to the dedicated manufacturers and those on the cutting edge of innovation that need that extra capital to be able to push their businesses to the next level – it is for them that this bill is coming through. This is a transformational step. It will have a tangible, positive impact in our community, in our business community, in our state. I commend the Treasurer for bringing it forward, and I commend the bill to the house.
