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Legislative
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| Ian Gilfillan Australian Democrats Member of the Legislative Council |
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Legislative
Council |
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| Ian Gilfillan Australian Democrats Member of the Legislative Council |
Parliament Index |
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RETAIL AND COMMERCIAL LEASES (GST) AMENDMENT BILL
Adjourned debate on second reading
The Hon. IAN GILFILLAN: I intend to raise a number of issues, some of which we believe are undesirable and others which I am yet to be convinced are needed, and to indicate that the Democrats will not be supporting the second reading of the bill. I would like to deal with the bill in three parts: firstly, the proposed arrangements that seek to validate the GST recovery clause, as the Attorney-General describes it, that is found in some leases; secondly, the matter of amending section 24 (1) (j) of the act, regarding calculation of turnover rent as it relates to the GST; and, finally, the matter of outgoings and whether it is appropriate for GST liability to be included in this section.
As I have stated, we will not be supporting the second reading of the bill, and there is no particular need for me to comment on the definitions put forward for GST, GST law or GST liability. But I will speak to the proposed amendment to the definition of `outgoings' when I address the matter a little later in my contribution.
I refer to confirming the validity of agreements entered into for GST to be passed on from landlords to tenants. This bill is targeted at a particular group of leases entered into prior to the commencement of the commonwealth's GST legislation (this being before 8 July 1999 and, in some cases, 2 December 1998), further narrowing the group of landlords and tenants that will be affected by the proposed amendment. It is specifically aimed at those leases that have had the so- called GST recovery clause inserted into the existing lease.
Current legislation would prevent such GST recovery clauses from being enforceable. I believe that we need to be clear on this point. Although this would have no effect on leases signed after the commencement of the Commonwealth's GST legislation, it could affect every lease signed prior to this date. The Attorney-General suggests:
The proposed amendments will not impose on tenants anything other than what they have agreed to by way of an adjustment of their lease agreements to account for the introduction of the GST.
It is very hard to see how this rings true. Aside from the fact that such agreements between landlords and tenants are unenforceable, one is led to ask two questions. First, just how widespread are these GST recovery clauses; and why would a tenant who already has a lease agreement agree to insert such a clause? The GST recovery clause is clearly an imposition on the tenant and really only benefits the landlord.
Secondly, to look to the future implications of the bill, it is conceivable that, by entrenching such provisions in legislation, we could see that as endorsing such a clause being inserted into other existing leases and, hence, increasing the pressure on other small retailers to agree to such measures. It is for these reasons, plus the retrospective nature of this amendment, that we will not support it.
To turn to the matter of turnover rent, it is true that some rent arrangements are based on the turnover of the lessee, and naturally taxes are not included in the calculation of turnover. The amendment proposed in this regard seeks to further clarify that the GST is also not included in the calculation of turnover. The current section provides:
Turnover does not include the net amount paid or payable by the lessee on account of any purchase tax, receipt tax or other similar tax imposed at the point of retail sale or hire of goods or services.
This current definition, it seems to me, would include the goods and services tax, and the Attorney-General himself has stated that to change this would merely be a clarification. Therefore, I ask whether this change is really needed at all. Having said that, the Democrats are yet to be convinced that this change is necessary and will not support it unless a more convincing argument of its necessity is presented.
On the matter of outgoings, I make two points. First, that the measures proposed are not cost neutral to retailers. Secondly, this amendment, it seems, is an alternative attempt to allow landlords to pass on their GST liability to tenants who have leases that were signed before the commencement of the Commonwealth's legislation. To point out that the amendment would not be cost neutral to retailers, outgoings are essentially an estimate by the lessor of `expenses of operating, repairing or maintaining the retail shop or a retail shopping centre in which the retail shop is located'. This estimate is billed to the lessee.
At a time three months hence, the bill and any reimbursement the lessee has made is reviewed. By including the GST liability in this estimate, the cash flow burden on the small retailer is increased. This would be even more of a burden for the retailer who does not collect GST on their goods, as their cash flow, in a relative sense, would be smaller. The bill, if passed, would affect only those leases-leases that will, in time, be brought into line with the new commonwealth legislation when it is reviewed or renewed.
The Democrats see no need to accelerate this process and would seek to give small retailers in this situation the time to adjust to the GST as was intended by the Commonwealth's legislation. I repeat that the bill raises some important questions about the government's commitment to small retailers. We have worked hard to improve the business environment for small business in South Australia and, as we see this measure as detrimental rather than assisting that, we do not intend to support the second reading.
