Moved by Councillor Miller, seconded by the
Chair (the Lord Mayor) –
It is resolved that:
(A) Council note:
(i)
across
Australia, vacant high street shopfronts break the continuity of active street
frontages, reduce passive surveillance and empty commercial spaces decrease
productivity. The City of Sydney 2022 Floorspace Survey identified that there was
1.7Msqm of vacant business floor area based on a 9.5% vacancy rate and an
increase between 2017-2022 of 49.4% vacancy
(ii)
this represents both a
lost opportunity cost to business as well as a real cost
to councils in terms of maintenance and street cleansing. Ultimately, it
is not the asset owner who pays, but instead ratepayers
who underwrite the costs of neglect, including cleaning, security, and graffiti
removal
(iii)
while
commercial property attracts rates and taxes whether occupied or not, federal tax
settings currently allow landlords to claim holding costs such as interest,
insurance and rates as tax deductions even while properties sit idle,
effectively subsidising chronic commercial vacancy to the financial benefit of
private investors
(iv)
federal
taxation incentives have contributed to well-located property in our cities and
towns being treated as an asset class rather than infrastructure designed to
stimulate the economy through employing staff and selling goods. Specifically, capital
gains discounts and negative gearing have, over the past decades, made it
easier for investors to accumulate wealth and drive up
property and rent prices
(v)
in May
2026, the Federal Government announced changes to negative gearing and capital
gains tax (CGT) (Australian Taxation Office, 2026). The new laws limit negative
gearing on residential investments to new builds and replace the 50% CGT
discount with cost base indexation and a 30% minimum tax rate on capital gains
(vi)
notably negative gearing changes only apply to
residential and not commercial property. While the intent of the reforms
to negative gearing and capital gains tax is to stop the practice of property
investors using their net rental losses to offset other sources of taxable
income in the future, they don’t apply retrospectively and risk incentivising
investors to make holding commercial property a key part of their long-term
investment strategy
(vii)
councils
currently have no legislative power to effectively price vacancy (in the case
of NSW, as noted in the IPART Review of the Local Government Rating System, 21
June 2019). Across Australia, state and territory legislation strictly limits
how councils can set rates and charges. Under prevailing rate capping and
pegging frameworks, any council-levied vacancy charge would fail to raise net
revenue; it would only redistribute the tax burden among existing business
ratepayers
(viii)
the most
effective regulatory levers to address prolonged vacancy are taxation
mechanisms that sit at the State and Federal level. Adjusting national revenue
settings, such as denying tax deductions for holding costs on chronically
vacant properties, and adjusting negative gearing concessions for commercial
property to be in line with changes to residential, removes the financial
incentive for speculative land banking
(ix)
comparable
international jurisdictions successfully escalate charges or remove concessions
based on vacancy duration. San Francisco’s Commercial Vacancy Tax applies to
ground-floor space after 182 days, while jurisdictions like Ireland utilise
formal vacancy registers to apply significant financial penalties; while
domestically, Victoria has aggressively expanded its Vacant Residential Land
Tax (VRLT) statewide, enforcing progressive penalty rates that escalate from 1%
of the property's Capital Improved Value in the first year to 3% for subsequent
consecutive years of vacancy, alongside penalising long-term idle land across
metropolitan Melbourne
(x)
manual
vacancy registers place an unsustainable administrative burden on local
councils and are inefficient to maintain across jurisdictions. Instead,
automated electricity consumption data provides a definitive, zero-cost
mechanism to identify long-term vacancy. By legislating that electricity
suppliers must report commercial meters demonstrating zero movement over a
12-month period directly to the Australian Taxation Office (ATO), with the
addition of opt-in reporting for councils as they encounter chronic commercial
vacancy throughout their local government areas (LGAs), the Federal Government
can secure the verified, automated data required to administer federal tax
settings effectively without overly burdening local government
(xi)
the City of Sydney has identified some of the
impacts of vacant commercial floor space in the Floorspace and Employment Survey
(2022), Cultural Strategy 2025-2035, Greater Sydney creative spaces
affordability study (2025) and its submission to the Art of Tax Reform: What we
heard, consultation summary report (2025), and identified state government
levers such as tax deductions for below market rent, leasing and vacancy taxes
as potential solutions
(B)
the
Chief Executive Officer be requested to investigate and report back to Council
on the advocacy pathways required to compel energy retailers to share anonymised
or targeted zero-consumption commercial meter data with federal authorities to
support national vacancy tracking, or similar measures successfully employed in
Victoria by the State Revenue Office to track and enforce vacancy taxes
(C)
following receipt of the Chief Executive Officer’s
advice, the Lord Mayor be requested to write to the Federal Treasurer and the
Federal Minister for Local Government advocating for amendments to federal tax settings
such as ending the taxpayer subsidisation of commercial land banking by
restricting the tax deductibility of holding costs for chronically vacant
commercial properties, and bringing negative gearing changes to commercial
property sales in line with the 2026 changes made to residential properties
(D)
Council
endorse the following motion for submission to the 2027 Australian Local
Government Association (ALGA) National General Assembly:
This
National General Assembly calls on the Australian Government to investigate
amendments to the federal tax system, such as reviewing holding cost deductions
and negative gearing concessions, to disincentivise the chronic vacancy of
commercial properties across the country’s urban high streets. Furthermore, the
Assembly calls on the Federal Government to establish an automated reporting
framework requiring electricity suppliers to submit data on commercial meters
registering zero consumption over a 12-month period directly to the Australian
Taxation Office, providing the definitive intelligence required to administer
federal tax levers and stimulate economic revitalisation without placing
administrative data-collection burdens solely on local councils.
Carried unanimously.
X113761