New Tax for Western Sydney

So after much debate seven councils get up to $15M each while residents opposed to a 24Hr airport get slugged with a tax that has never been applied to any other infrastructure development in Australia, simply because, I guess, Western Sydney residents should not profit from government spending... welcome to the new age of value capture tax

https://www.facebook.com/video.php?v=2025021617521961

 

I heard a story of a large property owner near the new Cudgegong Road Station (the last station on the new metro line near Rouse Hill). 5 acres from memory. Held on for several years after the rail link eventually got the go ahead. Hard work looking after a property that provided income from food production after taking the property over after their parents became too old. The property sold for $17mill to a large developer, then on-sold a year later for perhaps $5mill more. The property would have been in the family for a generation or more. One fellow that will have a very comfortable retirement.

With a bit of searching I found this paper:

http://infrastructureaustralia.gov....cal_paper_on_value_capture-September_2016.pdf

Some of the ideas presented: - extracts from Section 6.

Development Rights

A ‘development licence’ system could be contemplated, consistent with that being proposed by the State Government for central Melbourne. A key proposition is that ‘development rights’ have a value that is conceptually distinct from the attributes of the particular piece of land which might host development. In theory ‘development rights’ could be auctioned separately, that is, without reference to any specific piece of land (though the planning controls set for the site would still apply). Indeed, this occurs in some countries overseas which feature ‘transferable development rights’, and in some Australian jurisdictions albeit in a more restricted way. For example, the Victorian Government’s Docklands Authority (the predecessor to Places Victoria) sold development rights in the Docklands Area separately to the land, with land ownership passing over only after projects or stages had been completed.

Re-engineering ‘stamp duty’ to capture value gain rather than tax total property value

Stamp duties at present bear no relationship to economic productivity of land or to passive, unearned windfall increases in land value. The total amount of tax collected primarily reflects the level of transactions in the market, and only secondarily changes in land values. Existing stamp duties relate to the total value of property sales, not just the land component. The intent of value capture from passive gains in value would be best met with a tax only on the land component, and specifically on the unearned increase in land value since the previous change in ownership.

and this example:



Land tax reform which recognises the multiple drivers of land value uplift, including state infrastructure

While the ‘purest’ reform would involve ‘tidying up’ the current system to remove exemptions and applying an appropriate rate in the dollar to the unimproved value of an owner’s landholdings, it might be that a transitional reform would involve a ‘metropolitan transport land tax’ hypothecated for spending on transport improvements. This would apply only in metropolitan areas as a rate in the dollar and only begin for properties above a certain value (e.g. $200,000 unimproved value). Linked to future value rises and to needed transport spending, such an approach might be more politically acceptable.

More strategic use of government owned land to capture value for transport infrastructure

Going back to a model where government entities develop and sell government-owned land.

• Government owned renewal agencies intervening to purchase, plan and prepare strategic sites where market failure exists (e.g. fragmentation, contamination, etc.) for sale and development by the private sector.
• Government owned greenfield land developers, in the market for ‘raw’ land and pursuing an innovation agenda through the development process to reap the value of rezoning, subdivision, the provision of local and state infrastructure and housing development (the latter often in joint ventures with the private sector).
• Holding major government owned renewal sites or precincts for development on a leasehold basis, to capture value through successive waves of development. In Australia state governments are dependent on the federal government for tax transfers to meet their spending responsibilities. This is one driver behind the states selling government land assets to supplement revenues. It also may explain some of the risk averse approaches to the development of government owned sites such as Barangaroo (e.g. requiring an upfront payment for South Barangaroo and making contamination ‘clean-up’ the responsibility of the developer). Governments appear reluctant to commit resources in the short term. However, there is a strong case that government should hold ownership of major renewal sites or precincts and offer them to the market on a long term 36 leasehold basis, after preparing them for development. The government is assured of receiving a fair and appropriate share of the uplift value in these circumstances.

 

The Government cant pass basic tax laws. They will struggle to introduce a new additional capital gains tax.

Laughable when on one hand they want to rip into land owners who may benefit but as soon as we benefit from hydro infrastructure they want to sell it to spend the $$$ on more infrastructure they cant afford.

Keep selling the farm land to buy more cattle on a massive scale

 

Residents of Sydney's east, south and north are going to be hit by new tolls on the SHT, SHB & eastern Distributor to contribute to the new northern beaches route. Nothing new.

 

For a moment, I thought you were calling something SH|T, then i realised you were referring to Sydney Harbour Tunnel

 

Well, yeah, it is. Residents in Western Sydney are already paying close to $5 each way in tolls, and some of them will also use the other routes as well.

 

However, those using certain motorways can also get the ridiculous cash back too unlike M1, M2, ED etc.

 

Maybe you haven't read the article. Hubby's right onto it.....me not so much, but one of the proposed ways they have discussed to capture this is by an additional tax on the value of the capital gain of the property..........UP TO 60%. And we're not just talking about IP's either. This is a disgrace!

 

Dreaming.....The last thing Treasury would do is create a subclass of people with a further CGT issue. It may not even be Constitutionally valid to define a specific region and tax it under Income Tax laws.

The land has sat idle for 30+ years for this airport. The winner is the Commonwealth Govt who will flog it off after its built in a float. The CGT losses on the overpriced sale when it collapses can offset the CGT gains on property.

Small minded approach to think an airport will benefit all of Western Syd. For many it will mean congestion to get around so they can get to their real job which is East of the airport. And you can bet the tolls on the new roads around it will hurt.

 

They may well be dreaming on how it's going to be implemented, and how much it's going to be, but the fact is that 7 out of 8 Councils involved have already signed their approval of a 'Value Capture Tax'.

 

Councils aren't allowed to impose tax according to the Australian Constitution. Hard to get the Constitution changed to bring in a new tax !! Its why state land tax isnt assessed like in the ACT. Rates are a charge for services provided.

Stupid councillors at 7 out of 8 councils. I would not get too excited by this inept idea. Councillors have proven their past ability to appease developer friends who would oppose any further tax on profits.

 

From what I understand this will be a tax levied on NEW properties long the rail corridor. Ie new units, subdivisions etc. it won't be a tax on exisiting properties.

 

Nothing at a ll or whatsoever has been mentioned in Parliament. Its still dreamland. Councils lack power to tax. Or impose new levies. Dreamland

Even state law doesnt allow this.

 

The proposed value capture (tax) as I understand it will have a base rate that will apply to all existing properties in the LGA's regardless of whether they are owner occupied or investment, and will be applied as long as the government determines. Given the sunset date on collection of tolls on the M4 the 'value capture' period could be in excess of 30 years.

Properties deemed to likely benefit more from the new infrastructure, say those located along the rail corridor or near to the airport will be charged an additional amount above the base rate.

The two taxes above are likely to be collected as a special levy on council rates.

Further, when a property is sold the government will assess the Capital Gains to determine to what degree they believe the properties increased value was due to the government infrastructure or ‘passive, unearned windfall’. This value will then be taxed at 60%. It's basically a CGT applied to all property within the LGA whether owner occupied or otherwise and will have no percentage reduction regardless of the term the property is held.

Unlike a toll the above taxes will likely be applied prior to the infrastructure works being completed, they do not rely on property owners using the said infrastructure, and assessment of benefit and therefore payment due by owners is at the governments discretion.

The government may be reluctant to call 'value capture' a tax but it quite clearly fits the criteria, further more it is an unfair burden on a section of the community simply due to their proximity to an infrastructure project of national importance.

 

Perhaps I should clarify, the various methods for calculating and collecting the value capture (tax) are outlined in recommendation papers commissioned by the government.... proposed would imply they have been ratified which is not the case.

However, in the past Australia has had a number of infrastructure projects funded via 'betterment levies' which were similar to the base rate 'value capture' model. Depending on the specific project the amount due was based on either a flat rate per acre, % of unimproved land value, or % of rateable value of commercial property.

As these types of funding models have been used in the past I should think that there would be no legal pediment in rolling out a similar scheme today re-badged as 'value capture'.

All I can say is that if the government has commissioned numerous papers, and is now subtly mentioning 'value capture' in interviews then they are testing the water to see if the idea is a political bombshell. We therefore better make sure they hear 'boom' before this type of funding model gets adopted for future projects.

 

I'd say most of the infrastructure spend will be dependant on some level of value capture (especially the Airport & Train line).

 

The failure of many "Corporations" which are established to hold a stake by various Govts has been a failure in the past. Overvalued every time. Just look at Sydney Tollways and Tunnels. Most have been liquidated and new buyers paid a fraction of the original stakes. Perhaps a light rail network will join the fray ?

I smell Macquarie Bank sniffing for ways to rip into the airport and its users after they passed on it. Through surrounding infrastructure. They of all people know its a loss to own a overpriced high risk stake but if you clip the ticket of everyone arriving or departing its a gold mine. Clip the ticket on the tollsways, rents for the warehouses, rents for offices, car parking, even the aircraft and infrastructure financing !!

If this model was adopted the big four banks would be in trouble. Non-equity interests through debt can avoid the issue. The true owners of that airport will end up being Industry Super Funds and union members