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Darley blinks on land tax - but Greens put new deal in jeopardy

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UPDATED | The Marshall Government’s contentious land tax changes could yet become law, with crossbencher John Darley confirming a deal with Rob Lucas to secure his crucial vote – but the fresh changes are set to cost the Treasurer crucial support from previous backers of the Bill.

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Advance SA MLC Darley holds the balance of power in the state’s Upper House and had been firm in his opposition to the controversial changes, particularly a clampdown on aggregation provisions that will net Treasury an extra $86 million a year.

He has also firmly rebuffed a range of compromise proposals offered thus far, calling them “rubbish” and arguing the Liberals had “shot themselves in the head” and “won’t win another election for 20 years”.

But after a series of meetings across the weekend, Darley has finally blinked, with Lucas now agreeing to a final deal that will see the rate for the middle tax threshold plummet from its current 1.65 per cent to well below the 1.25 per cent now favoured by Business SA, as InDaily revealed last week.

However, the latest in a series of land tax compromises is set to leave a dent in the Budget – and could yet leave the legislation in parliamentary limbo.

InDaily can reveal that the Greens – who had previously strongly backed the Bill – are now reviewing their position, while the state’s Social Services Council now says its advice is to “scrap the lot”.

Darley’s vote became crucial after the Labor Opposition opted to oppose the legislation.

With the Greens previously in support on equity grounds and SA Best opposed citing economic concerns, Darley emerged as the crucial vote that would get the Bill over the line.

A $10 million compensation fund Lucas had previously offered to offset first-year losses for investors burned by the aggregation provisions will be bumped up to $25 million over three years.

Darley told InDaily this morning he was “still talking, negotiating,” but asked if he expected the Bill would now pass, he said: “Yeah… I reckon it probably will.”

He said the new changes revolved around “rates in the dollar” and “transition arrangements”, but would see the aggregation changes retained in the legislation.

The changes were ratified by cabinet, with a Liberal partyroom meeting today shifted to an earlier-than-usual time of 1.30pm, after which Lucas confirmed the deal in a media conference.

The $25 million transition fund “disappears after three years and gives taxpayers the opportunity to restructure their affairs over three years”, he said, while also confirming the middle tier rate would fall from 1.65 per cent to 1.25 in 2020-21 and to 1.0 in 2022-23.

The top threshold rate of 2.4 per cent will now kick in at a threshold of $2 million from 2022-23, while Lucas will offer a land tax concession for eligible developers of affordable housing, a key plank in Darley’s demands.

The cut-off date for the nomination of beneficiaries of discretionary trusts – understood to be a major gripe of the Liberal Party’s internal dissidents – will be extended a year until 30 June 2021.

A second reading vote is expected to be held in parliament tomorrow.

Lucas also confirmed that the package now cost taxpayers $39 million over three years – a far cry from the $40 million in revenue the original aggregation plan was intended to claw back.

The magnitude of the mooted concessions have thus seen the land tax package go from a net revenue raiser to a budget burden – even with the $86 million returned to Treasury via aggregation provisions.

Lucas’s previously announced reduction in the top land tax rate from 3.7 to 2.4 per cent had already reduced the budget windfall to $31 million a year, according to an independent PwC report commissioned by the Government.

A subsequent deal with the Property Council to increase the maximum threshold at which the top rate is levied further reduces the budget revenue by $5.7 million in 2020-21, increasing to $8.8 million in 2022-23.

The budgetary implications do not sit well with SACOSS, whose CEO Ross Womersley told InDaily today: “A big part of [our support] really was that it would create money for the budget, some sort of social dividend for the community… that was a key element from our perspective.”

“I think if there’s no social dividend, we’d say ‘scrap the lot’,” he said.

Lucas has done a series of deals with the likes of the Property Council and Business SA to garner their backing, with Womersley lamenting: “It looks to be as though the Government has been very comfortable handing out all sorts of concessions to industry groups.”

“The top end of town will largely get enormous tax breaks as a result of this legislation, but we’ve not been offered any deal that recognises the interests of the community more broadly,” he said.

“If there’s no dividend to the community… then in fact I think our advice to the parliament would be to scrap the whole lot.”

He said he’d be advising the Greens of that view later today.

Greens MLC Mark Parnell told InDaily the party – which holds two seats in the Upper House – “liked the aggregation measures as a fairness reform, but we also liked the revenue which we want spent on social housing”.

“Stay tuned,” he said when asked via text message whether the Greens would still vote for the legislation.

He said he had told Lucas by phone today that the Greens would review the details of any deal with Darley “before we decide whether to continue to support the land tax reforms”.

Labor’s Treasury spokesman Stephen Mullighan said today “it would be a stunning reversal for John Darley to now support the aggregation measures”.

“This would be a shock to the hundreds of people who came to the community forums where he gave an undertaking he would not support the aggregation changes,” he told InDaily.

“Any further changes to rates and thresholds will do very little to help the thousands of South Australians facing over $80 million in higher aggregation charges every year.”

SA Best MLC Frank Pangallo said in a statement that Darley’s change of heart was “yet another example of his indecisive decision-making” – a veiled reference, perhaps, to his decision to quit the formerly Xenophon-led party before the last state election.

“He came, he saw, he promised and he completely and utterly capitulated,” said Pangallo.

“Mr Darley’s appalling backflip is an absolute insult to the hard-working mum and dad investors who will be hardest hit by these reforms.”

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