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Thursday, 28 June 2012
Page: 4867

Senator MILNE (TasmaniaLeader of the Australian Greens) (17:37): I rise today to respond to the Tax Laws Amendment (Managed Investment Trust Withholding Tax) Bill 2012 and the related bill and to indicate to the Senate that the Greens did have concerns about the effect of the increase in the withholding tax from 7.5 per cent to 15 per cent, because we believed it would have a detrimental impact on investment in Australia, particularly in green buildings—and by green building I mean buildings that meet higher standards of energy efficiency and performance. These concerns were especially in light of the fact that the government abandoned in the budget this year the tax breaks proposal for green buildings, which by the time the budget came around was not actually put forward as tax breaks but as a grants proposal. That was particularly disappointing to the Green Building Council and the Property Council, for example, because they had actually forgone the tax cuts in the budget the year before in order to try to get a better program.

So, in the absence of any kind of particular incentive for energy efficiency in commercial buildings, and with neither the government nor the coalition prepared to support a white certificate scheme for commercial buildings, there is no incentive in Australia to actually build to higher standards of energy efficiency. And the problem with buildings, as we know, is the split incentive. If you own the building you are not paying the energy costs associated with its performance; that goes to the tenants to whom you let the particular space. So you have to find ways in which to make sure you are building better buildings in the first place, and you incentivise more efficient spaces. We have pushed for a long time for transparency of the energy performance data, not only transparency at the time of sale or lease but an ongoing transparency. The government has gone as far as transparency in relation to sale or lease but not ongoing disclosure. In that context, I was keen to make sure that we tried to do something that drove or incentivised construction of green buildings. To that extent, we began to look at this particular increase in the tax rate.

We listened to the concern of the Green Building Council, the Property Council and other bodies in relation to the impact on foreign investment in the Australian property market—in particular, proposed buildings and green buildings. After some discussions we reached an agreement with the government to support the bill on the basis that the government has given us a commitment to introduce legislation in the spring sitting to provide a withholding tax rate of 10 per cent for investment in buildings that achieve at least a five-star Green Star rating or a 5.5-star NABERS energy commitment. The rate of 10 per cent applying to energy efficient buildings will be for buildings that are constructed post 1 July 2012. Basically this is saying that, if money is coming into the country to build commercial buildings, if they do not meet that five-star Green Star rating or 5.5-star NABERS rating then they will pay a 15 per cent withholding tax. If they do meet the higher energy efficiency standards then they will pay the 10 per cent rate. I think this measure will encourage investment in environmentally friendly buildings. This particularly applies to many of the overseas superannuation funds, particularly teachers' and nurses' funds and the like, because they set quite high ethical standards for the way the money is disbursed, and they require that the investment meets some environmental or sustainability objective.

So I think this is going to match quite well, hopefully, with a drive in Australia to start building much more efficient buildings in the first place. This of course will lead to lower electricity bills for people who rent those spaces, and that is going to increasingly become a key element of which office spaces various sectors choose to rent. Over 50 per cent of the Green Star buildings in Australia at the moment are five-star green or above. We want to encourage investment in more of those buildings. It is good for the environment and good for the tenants.

I think it is a good outcome that government revenue raising is supported while investment in green buildings is protected. It is a win-win scenario in terms of meeting the government's revenue objectives but also driving a greater investment in green buildings. Of course we would have liked to see it extended to the retrofits. Of course we would have liked to see it extended to buildings that are under construction but not completed. Nevertheless, I think this was a major achievement for driving the push into energy efficiency in the construction sector. That is the basis of the agreement we reached with the government to support the withholding tax, and we will expect that legislation on green buildings to come through in the spring session.