A clear picture of the problem of Australian Debt

Senator Barnaby Joyce

A picture paints a thousand words so a good understanding of our gross debt is seen in the graph below.

It shows clearly that the Coalition is a government that pays off debt and that Labor is a government that creates debt and Mr Rudd is creating debt at a faster rate than has been seen in recent history. With gross debt currently in excess of $125 billion one would be foolish if they were not concerned by the trajectory of the growth in debt.   How would you feel taking this to your local bank manager as an example of your fiscal prudence, and the ceiling insulation program as an example of your management technique?

If we continue on the trajectory that is self evident in this graph we are most definitely going to arrive at a point of reckoning.  This point of reckoning will place immense pressure on the budget and the delivery of such services as health, education, defence, foreign aid, childcare and everything else that relies on the public purse for payment. 

Labor cannot just go on borrowing money at the rate that is portrayed in this graph and it is absurd to look at the trajectory of this graph and say that you do not have a concern.  It is vastly easier to manage problems when they are manageable.  It is far more prudent to “dot the i’s and cross the t’s” and manage the problem now than to wander into the chamber at a later date with a sorrowful look on your face wishing if only we had that time again we’d have done things differently. 

While the ceiling insulation fiasco is an evident example of Labor’s lack of management in the forefront of government, this trajectory of debt exemplifies serious underlying concerns in the background.

Mr Tanner’s statement of not “dotting the i’s and cross the t’s” is beyond concerning, it is truly incredible.

Increased costs and reduced rights for landowners:

The impact of the Valuation of Land & Other Legislation Amendment Bill 2010

by Fox & Thomas Business lawyers.

Rates, land tax and Crown rent and payouts on new freeholding applications are set to rise and landowners’ rights in relation to unimproved valuations are set to be eroded if the State government's proposed amendments to the Valuation of Land Act (1944) (Act) are passed.

The major changes introduced by the Valuation of Land & Other Legislation Amendment Bill 2010 (Bill) are:

·       amending and widening the definition of unimproved value;

·       changing the objections and appeals process; and

·       making the amendments retrospective to 30 June 2002.

Unimproved value

The amendments will require the following to be taken into account when determining the unimproved value of land:

·       development and entrepreneurial profit in developing land;

·       the value of leases, including agreements for lease and other instruments, which increase the value of land;

·       the value of the goodwill of a business operating on the land;

·       infrastructure charges;

·       the value of improvements by requiring that, in determining the unimproved value, the added value of improvements will be the lesser of:

°           the construction costs of the improvements at the date the improvements were constructed, not at the date of valuation; and

°           the depreciated value, if any, recorded in the books of account of the owner plus holding costs.

Previously the definition of unimproved value in the Act had been interpreted not to include these items.  The effect of the amendments will be to greatly increase the unimproved value of many parcels of land.

With costs such as rates, land tax and crown rent calculated having reference to the unimproved value, an increase in unimproved value will result in an increase in costs.

The freeholding payout amount on applications to either freehold or obtain a freeholding lease will also be affected by any increase in unimproved value.

Valuation process objections and appeals

Previously land having similar characteristics could reasonably be expected to have similar unimproved values.  It was often relatively easy to determine whether the unimproved value was appropriate by having reference to similar nearby land.  With the introduction of so many new components into the unimproved value, land's unimproved value will no longer be reflective of the value of similar land in the same district or area.

Changes have also been made to the objections and appeals process which will make this process more difficult for landholders as follows:

·       an objection must contain detailed grounds and must be accompanied by valuation reports, depreciation schedules and assessments of insurance or replacement costs of improvements.  It will therefore be more time consuming and costly to lodge an appeal;

·       a fee has been introduced for lodging an objection;

·       the Chief Executive may lapse an objection if the Chief Executive does not believe there are sufficient grounds;  and

·       there is a restriction on the right of recourse if the Chief Executive lapses an objection.

Implications for landholders

The amendments to the Act will lead to:

1.    rising costs for many landholders;

2.    increased rents for tenants as landlords seek to pass on these costs;

3.    increased freeholding payouts for news applications to freehold leasehold land;

4.    downward pressure on the value of affected property; and

5.    increased cost and difficulty to amend incorrect valuations.

An example of how the amendments will operate can be shown having regard to 9 similar parcels of land which could quite feasibly have vastly different unimproved values:

·       property with no development approval;

·       property with development approval (for example a feed lot or grain processing facility);

·       property with development approval and lease in place;

·       property with incomplete development with an agreement for lease in place;

·       property with incomplete development without an agreement for lease in place;

·       property with completed development with a lease in place;

·       property with completed development without a lease in place;

·       property with completed development with a lease in place where that lease or tenant adds significant value to the property; or

·       property with completed development with a lease in place but with different or reducing terms.  E.g. as time passes the term remaining in a lease reduces.  If a lease adds value to a property, this value will reduce as the remaining term reduces and so to therefore will the unimproved value.

Whilst debate on the Bill has been postponed, while ever this remains on the Government’s agenda, landholders’ rights are at risk.

For further Information contact

Michael Cowley, Director

michael.cowley@foxthomas.com.au

Ph:  07 4620 8786