New Victorian Premier’s office blindsided by tax announcement
Victorian Treasurer Tim Pallas insists Jacinta Allan was aware of his plans to announce a new property tax, despite the new Premier’s office and the Assistant Treasurer being blindsided.
Victorian Treasurer Tim Pallas insists Jacinta Allan was aware of his plans to announce a new property tax, despite the new Premier’s office and the Assistant Treasurer being blindsided by the move, engulfing the government in chaos on Ms Allan’s first parliamentary day as Premier.
Speaking to a room full of industry stakeholders at a Property Council breakfast on Tuesday, Mr Pallas flagged the introduction of new legislation, which will see taxes on vacant residential land expanded to include all of Victoria, rather than only eight inner and middle metropolitan Melbourne municipalities.
The announcement not only shocked the property industry, but caught Ms Allan’s office and Assistant Treasurer Danny Pearson by surprise, as he was forced to tell journalists: “I’m not across that,” when asked about the tax on his way into parliament.
Ms Allan’s office also appeared to have been caught unaware, with journalists initially told by Mr Pallas’s office that he would answer questions about the issue at 11am, before Ms Allan’s office intervened and delayed his doorstop until 3:15pm.
The new tax comes less than a fortnight after CEOs of property industry bodies and companies stood alongside Ms Allan, Mr Pallas, then premier Daniel Andrews and other key ministers to announce a partnership as part of Labor’s housing policy statement.
Currently, Victoria’s vacant residential land tax, on homes which are unoccupied for six months or more, only applies to the inner and middle suburbs of Melbourne.
The new measure will expand the tax — which is levied at a rate of 1 per cent of the land’s capital improved value per annum — to include residential land in outer suburban and regional areas from January 1, 2025.
Holiday homes are exempt from the tax, with Mr Pallas estimating its expansion would see to go from raising about $10 million a year from approximately 900 properties, to raising another $6m from an extra 600-700 properties.
The Treasurer said the government would also expand the tax to include vacant, residentially zoned land which has been unimproved for five years or more in established areas of metropolitan Melbourne, from January 1, 2026. He said it was less clear how much money the second measure would raise.
Asked how it was that members of the Premier’s office and his own Assistant Treasurer appeared to have been blindsided by his announcement, Mr Pallas said it had gone through “normal cabinet processes”.
“I’m not making it up as I go along. It’s been subjected to conversation, not only might I say with cabinet, but with my caucus colleagues,” the Treasurer said.
“Today I was doing an address to the Property Council, and I figured it would be disingenuous to wander into the Property Council, talk about our affordability partnership, and not do them the service of letting them know about the government’s intention around this tax.
“Now I know … it would have been a little less tense if I’d avoided having that unpleasant conversation, but I also think it’s what is a fair thing to do: look people in the eye, and tell them why you’re doing what you’re doing, and that’s exactly what we’ve done here.
“With regard to timing, I believe that certainly the Premier was aware of this, and the Assistant Treasurer, well, he’s the Assistant Treasurer. He’s got more than enough on his own plate, especially looking at the cabinet reshuffle and the extra responsibilities he’s got.
“The Assistant Treasurer looked after more the finance side of things. It’s the responsibility of the Treasurer to deal with tax, so I assume he wasn’t focused on the matters that we’d discussed.”
Asked whether he had been supposed to make the announcement later this week, Mr Pallas said: “Well, no, I think the only issue was whether it was going to be today that the legislation was introduced in the parliament, or tomorrow, and as the Manager of Government Business has decided we’re doing it tomorrow, there’s that 24 hour lead in, but I figured it would still be disingenuous to the Property Council and to the industry not to tell them.”
At his breakfast address, Mr Pallas told the Property Council Victoria could not afford to have vacant land in metropolitan Melbourne sitting idle “for year on year”.
“Our clear message to the landowners is to either develop the land or sell it to someone who will,” he told the breakfast.
“Similarly, we‘re not putting in place a rule for landowners that we as a state are not going to apply to ourselves. We expect every government agency that is holding land to justify exactly why they’re holding that land and not putting it into the marketplace.”
Mr Pallas said he believed the amendments were “a timely complement” to the government‘s housing policy statement, which was announced less than a fortnight ago, in partnership with the property industry.
“(They) will help provide more homes in Melbourne and across regional Victoria,” he said, claiming he did not expect nor wish to raise revenue from the tax.
“Of course, the implementation of these arrangements have quite a long lead time, as you‘d appreciate, and we’ll work with industry to ensure that they are developed in the most effective way, to amend behaviour without necessarily getting much in the way of revenue. In fact, I hope I get no revenue out of it and I hope I amend behaviour by it.”
The tax is levied at 1 per cent of the capital improved value of taxable land, meaning that if a vacant house has capital improved value of $500,000, the tax will cost the owner $5000 a year.
At the point at which Mr Pallas made the announcement, Ms Allan was holding a press conference with property developer Nightingale in the inner northern Melbourne suburb of Brunswick, to promote partnerships between industry and government as part of the government’s new housing statement.
Despite his office initially indicating to journalists that he would make himself available to answer questions regarding the new tax late at 11am, Mr Pallas failed to do so, with Ms Allan’s office later saying he would not be available before Question Time at 2pm, after which they would “reassess” his availability. He eventually gave a doorstop at 3:15pm.
Opposition Leader John Pesutto opened Question Time asking Ms Allan whether she was aware Mr Pallas had been intending to announce the tax at the breakfast.
Ms Allan deflected, saying: “What the Treasurer was talking about this morning and the Minister for Planning and I were talking to this morning was all about how the government is putting in place a big, bold reform agenda to build more homes.”
Property Council executive director Cath Evans said the industry had been “shocked” by Victorian Treasurer Tim Pallas‘s sudden announcement of an expansion of the vacant residential land tax at their breakfast on Tuesday.
“The reaction was one of shock,” Ms Evans said.
She said it had only been eight business days since the property industry had signed onto the government‘s housing policy statement, which set out “obligations of both government and industry to work collaboratively together to help resolve some of these very challenging economic times that we face in delivering housing stock to Victoria.”
“The industry went into this partnership in good faith, with the understanding that there would be consultation on any reforms going forward that affect the availability of housing stock. It‘s clear that without that consultation being followed, that there has not been good faith in the execution of the agreement to date,” Ms Evans said.
Ms Evans said the Property Council had been given no detail regarding the proposed tax, and was hoping to meet with the Treasurer’s office on Tuesday afternoon for a briefing.
Asked whether the industry was concerned about any particular adverse consequences of the tax, Ms Evans said: “There may well be, and the devil will be in the detail there. If work, which is designed to accelerate housing, which was clearly set out in the housing statement is not delivered, then these reforms may in fact be a further impediment to the delivery of housing stock.”
“It‘s eight days since the signing of, eight business days, since the signing of the affordability partnership. The industry remains ready to deliver an act in accordance with the agreement in good faith. We’re hoping that the government will also step in and honour that agreement,” she said.
In response to a report in The Australian on Tuesday that Citi analysts are concerned the Victorian government‘s housing policy could even increase house prices given incentives to increase construction may worsen labour shortages and cause additional wage inflation, Ms Evans said labour shortages remained a major challenge.
“There are plans in place, we understand, at a federal level to increase skills to the Victorian economy and to all of Australia either through increasing skilled migration and greater investment into training and development for construction, for workers in the construction and building industry,” she said.
“We’re looking forward to seeing those policies being released over the coming months. But there is no doubt that there is a significant strain on the available availability of labour in market at present.”
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