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Retail and Commercial Leases (Miscellaneous) Amendment Bill

Second Reading

Adjourned debate on second reading

(Continued from 19 October 2017)

The Hon. J.A. DARLEY (16:17): I rise to speak on the Retail and Commercial Leases (Miscellaneous) Amendment Bill. The bill makes a number of changes to the Retail and Commercial Leases Act in response to a review of the act which was conducted by retired District Court judge, Alan Moss.

The bill clarifies the issue of when GST should be included, gives direction on what information is to be provided to lessees, and inserts provisions for the government and the Small Business Commissioner to provide exclusions from the act. I have no issues with the above provisions and believe it will assist to clarify matters for both lessors and lessees; however, one aspect of the act which I have issue with is the matter regarding the rent threshold which is used to determine whether the act will apply or not.

Prior to 2011, the rent threshold was $250,000. I understand that this was the threshold that was originally in the bill when the original act was passed, and that it had not changed. Essentially if the rent was under $250,000, then the provisions of the act would apply; however, if the rent was over $250,000, then the act would not apply.

One of the provisions concerned was the ability to pass on land tax. If the rent was over $250,000, then landlords were able to pass on land tax directly to the tenant; however, if the rent was under $250,000, they could not pass on land tax directly but land tax could be taken into consideration when calculating the rent. This does not make sense to me as it seems it is just another way of indicating to landlords that land tax can be passed on, albeit as part of the rent rather than a standalone charge. I would be grateful if the minister could clarify to me what this means.

As mentioned before, the rental threshold for the application of the Retail and Commercial Leases Act was $250,000 but, in 2011, it was changed to $400,000. I understand there was no particular impetus for this change and that it was almost a matter of a public servant suddenly waking up one day, realising that the threshold had not changed since the inception of the act and deciding that it should be changed. By changing the threshold overnight, the government have caused significant issues to landlords who are now faced with having to pay land tax when previously it was the responsibility of the tenant.

I have had regular communication with one such constituent who is by no means a big-time landlord. She is akin to what is colloquially known as a mum-and-dad investor and now faces a loss of $35,000 per annum from her income due to the government's change in the threshold. At the time of signing the lease, the terms were understood by both the lessor and the lessee. A price was negotiated for the rent and, because this price was above the threshold, the lessee understood that they would be liable to pay the land tax. This was fair and transparent. However, because of the threshold change, the rent now came in under the new $400,000 threshold and the onus to pay the land tax was put back onto the landlord. To me, this is inherently unfair.

As such, I introduced a bill to rectify this, and I understand the opposition have amendments that emulate the provisions of my bill. Essentially, the amendments will mean that if a lease was over the $250,000 at the time the threshold was changed in 2011, then it would be deemed that they are not covered by the act and land tax is able to be passed on to the tenant. For clarity, this includes lease renewals. I understand the government will argue that it was always envisaged that the threshold would be a fluid figure and that landlords should have anticipated that it would change; however, the threshold did not vary for many years after the introduction of the act, and the market responded accordingly.

My position on this matter is that land tax should be able to be passed on in an open, transparent manner for all leases regardless of the rental amount. Lessors and lessees would be able to make decisions on leases with the full knowledge of what is expected. However, given these are problems currently with our land taxes accounted for leases that fall under the threshold, it would be very difficult to unscramble the egg and prevent landlords from double dipping. I think more work needs to be done on this matter to make the process more transparent. It should be no surprise that whilst I will be supporting the bill, I will also be supporting the opposition amendments.

Debate adjourned on motion of Hon. J.M. Gazzola.