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The ACT building industry is up in arms at a new $30,000-per-unit development tax, which developers say will make it uneconomic to turn residential blocks into townhouses and units and destroy infill. They also accuse the government of attempting to feather its own nest, by making its own land in the Northbourne corridor, the Fluffy blocks and new suburbs the only land viable for redevelopment. At the moment, if builders buy a house block in a suburb such as Dickson or Turner - or any suburbs built before 1971 - to convert to units, they face a "strata tile" charge of $7500 a unit for the first three units and $5000 a unit after that. But a little-heralded new tax in the June budget, the charge is hiked to $30,000 a unit. For a six-unit development, that pushes the bill from $37,500 to $180,000. When asked about it on budget day, officials said it simply brought two lease variation charge schedules into line. But ACT Master Builders Association deputy executive director Michael Hopkins said builders were highly concerned. People who had recently bought were now looking to "quickly resell their blocks before the market becomes fully aware of these increases", he told ACT budget estimates hearings on Friday. "Some consultants are advising clients to quickly lodge development applications before the charge becomes effective and others are advising their clients not to proceed with that project all together," he said. "This charge is not welcomed by industry, it gets us thinking what charge will be increased by 400 per cent next, and it runs counter to a number of other government policies of encouraging urban renewal and housing affordability." The industry says the change will capture at least 95 per cent of residential redevelopment in the older suburbs, which is mainly in the inner north and inner south, and will benefit the government's land profits and help it sell the over-supply of Fluffy blocks by making it impossible for other landowners to compete with the government land. Government land will not attract the charge because it doesn't involve a lease variation. But a spokesman for Chief Minister Andrew Barr said the changes only applied to residential leases that did not already specify a maximum number of dwellings. Most of them were pre-2000. In the past five years, there had been 120 lease variations of the kind, 29 per cent in Belconnen, 28 per cent in the Woden Valley and 23 per cent in the inner north. "The most common type of application that has attracted this charge in the past is dual occupancy developments in the RZ2 zone. In general, most proposals are for 10 or less units. "This charge will not apply to blocks which have been remediated under the Asbestos Eradication Program as the leases for these blocks already specify a number of dwellings." In a statement, Mr Barr said lease variation charges were an "economically robust taxation mechanism which ensures the community shares in the unearned windfall gain developers receive from changes to a lease that substantially increase the value of the land". Property Council ACT executive director Adina Cirson said there should be consultation or a transition period. "This difference is of paying $7500 per dwelling up to $30,000 per dwelling on those leases certainly came as a surprise and we're really not clear what the intention of that significant increase is at this point," she said. "[We're] particularly concerned in relation to the effect it will have on land values, one member of ours who is looking to amalgamate three residential blocks in O'Connor and put in 16 townhouses especially can't make that project stack up and have more value as three single leases." The tax applies to all residential leases issued before 1971 - the inner north, inner south, most of Belconnen, Woden, and parts of Weston Creek. The government says the new charge will bring those areas into line with suburbs built since 1971, including most of Tuggeranong, all of Gungahlin and Molonglo, and newer suburbs in Belconnen and Weston Creek. But Independent Property group director of project planning David Shearer said it was a radical policy change that targeted homeowners, was "a very effective way to tax the family home", with owners already bearing the brunt of huge rates increases, and would bring development to "a screaming halt". He called on the government to release the detail of the new tax, and said he hoped the proposal was more realistic than it appeared. And he accused the government of "an incredibly arrogant" lack of warning or consultation. "Many small developments just don't make enough money to hand an extra $22,500 to $25,000 per unit to the government .... "I find it very unusual that a government that promotes open communication and community consultation could make such a huge tax increase without a squeak or mention of it."

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