Written by: Matthew Kandelaars, Victorian CEO of the Urban Development Institute of Australia (UDIA)
Published: Thursday 24 June 2021
Words matter.
It’s concerning the Andrews Government’s recently announced new property tax – a ‘windfall gains tax’ – used sharpened words to justify a seismic shift in taxation policy.
This conceptual tax wasn’t underpinned by genuine consultation of its need nor its unintended consequences. Instead, it was couched as ‘only fair that everyone pays their tax share’, with obligatory negative references to property developers.
Today, Victorian development charges and taxes represent over $6.7 billion and property taxes make up 44% of state tax revenue, much generated from these very same developers. This will now accelerate. In 2019-20, Victorian residential construction expenditure generated $25.5 billion.
The windfall gains tax is a 50% tax applied to planning decisions to rezone land from 1 July 2022. The Government says this tax will ensure ‘multi-million-dollar overnight profits’ are shared with the community.
But let’s be clear: this is not a tax on ‘windfall gains’. This is a tax on rezoning land! It is a tax on property rezoning for which an individual or developer may themselves spend millions of dollars, and several years trying, before any value is extracted.
Some might say that’s just doing business. But it is the value generated from a rezoning that builds more Victorian homes, creates and sustains thousands of local jobs and builds new communities.
The Government’s language sought to sway opinion, and to gloss over the alarming lack of
tax detail and sceptical budget assumptions.
It also deliberately ignores the substantial contribution the urban development industry makes to Victoria, including creating affordable and social housing for families in need.
Think of a Victoria where development essentially stops. Housing supply would dry up and prices skyrocket. It would hasten Melbourne’s sliding liveability. Crazily, this tax runs counter to the State Government’s own Plan Melbourne for a growing Victoria.
UDIA Victoria modelling shows that on just seven case studies the rezoning tax will make
each property development unviable. They won’t proceed.
Seven stalled property developments alone will reduce housing supply by 6,696 dwellings (including over 300 affordable dwellings), cost over 20,000 direct jobs (nearly 100,000 indirect jobs) and result in $7.7 billion in economic loss to Victoria.
For every three dwellings built, 37 local jobs are created with $2.9 million in economic benefits.
The broader urban development industry is fundamental to Victoria’s economy, employing
300,000 people, with around 194,000 in residential construction.
Words matter, but so do actions. It’s time for the Andrews Government to redress the
property tax mess that’s about to unfold.
