Property tax glitch hits buyers

VICTORIAN home buyers could be forced to pay an extra $6.2 million in property taxes because of the bungled introduction of a $40 million electronic conveyancing system.

Builders and lawyers are furious about a move by the Government to boost taxes for paper-based conveyancing by as much as 32%.

The decision to increase fees for all paper lodgements by $15.50 in November last year was supposed to trigger a speedy shift to a new, more efficient electronic system.

But banks and lawyers are refusing to accept the new system — which has also been hampered by software glitches — amid concern about legal ramifications and potential liabilities for solicitors who use it.

That means all transactions are still being done using the paper system, leading to windfall tax gains for the State Government of $15.50 each time one is lodged.

Conveyancing is the sometimes complex process of transferring legal ownership of a property from one person to another. With an estimated 400,000 conveyancing transactions a year in Victoria, the gain for the State Government could be as much $6.2 million.

In a strongly worded letter to Land Victoria, Master Builders executive director Brian Welch said it was a "thinly veiled attempt to collect more taxation from the building industry".

The letter urges the State Government to remove the fee differential, saying it represented another unnecessary tax for the industry. "Taxes and charges on the building industry add 30% to the cost of a new house and land, with 53% of these taxes going directly to the State Government," the letter says.

Asked about the issue in State Parliament, the minister responsible for the new system, Gavin Jennings, conceded there had been some "teething problems" but said there would be no move to lower the fees. He said Victoria's aim was to establish a national conveyancing system to solve the problems.

"I am confident that despite some teething problems … I think at the end of the day Victorian people will be well pleased that we will be at the heart of a national electronic conveyancing system," Mr Jennings said.

In another letter to Land Victoria, Law Institute of Victoria chief executive Michael Brett Young said the fee increase was an unjust financial imposition, given it had been shunned by major banks and lawyers.

State Opposition scrutiny-of-government spokesman David Davis said families were being forced to pay for a Government blunder.

"The Government has introduced increases of up to 30% to encourage people to use its botched electronic system, essentially ripping off families who have no realistic choice but pay," Mr Davis said.

Under the changes, charges for paper lodgement of transfer of sale documents increased to $112.50 from $97; charges for registering mortgages increased to $92.40 from $76.90; and charges for registering a variation of mortgage increased to $64, from $48.50.

The Age
Josh Gordon
February 28, 2008