An artist’s impression of Molonglo’s proposed Dairy Road development: Photo: David Chipperfield Architects.
The battle over development taxes is hotting up with the ACT Commissioner for Revenue appealing an ACAT decision that described a $101 million lease variation charge claim as “manifestly absurd”.
Dairy Road developer Molonglo Group stated that the decision to appeal the reduction of the lease variation charge (LVC) bill to $26.48 million would delay the project by at least 18 months and ultimately threaten more than 700 homes and over 40 local businesses.
Molonglo says the decision to appeal would not only impact its Dairy Road project but also reduce the development of new housing across Canberra.
The company received development approval in August 2023 to build over 400 world-class homes at Dairy Road, but had not been able to deliver them due to the tax dispute.
During an ACT Civil and Administrative Tribunal hearing to resolve the final LVC figure, the ACT Commissioner for Revenue increased the assessed LVC from $37 million to $101 million.
But ACAT found the figure was “manifestly absurd” and “not economically feasible”.
Molonglo says it recognises the ACT Government’s responsibility to safeguard public revenue and ensure that developers contribute fairly to the city’s growth.
It says the government has legitimate concerns about the undervaluing of land, setting an unsustainable precedent, or appearing to give preferential treatment to any one developer.
But the Commissioner’s position risks undermining those very goals by preventing projects that deliver homes, jobs and tax revenue from proceeding at all, Molonglo says.
It would render future housing development economically unviable across the city, jeopardising the government’s target of 30,000 new homes by 2030.
Molonglo co-director Nikos Kalogeropoulos said the appeal was an attack on common sense.
“We cannot deliver the next stage of Dairy Road with an LVC charge of $101 million,” he said.
“It doesn’t work. An LVC is about raising taxation revenue for public benefit. If successful, it will economically terminate Dairy Road before one new home can be built. The ACT Government will win 100 per cent of nothing.
“There is no project to tax. No new homes to tax. No growth or expansion for Dairy Road businesses. The appeal is a waste of taxpayers’ money – the government’s position brings no benefit to Canberrans.”
Capital Brewing Co co-founder and managing director Laurence Kain. The delays limit the brewery’s growth plans and change the trajectory of the business. Photo: Supplied.
Local success story and Dairy Road business since 2017, Capital Brewing Co, has grown from a startup to one of Australia’s largest independent breweries, employing over 80 people.
Co-founder Laurence Kain backed Molonglo’s vision for the area, saying Dairy Road had been fundamental to the brewery’s success.
“These delays have already cost us financially,” he said.
“Further delaying, or worse, not realising the next stage of the neighbourhood at all, is a real blow to us. It limits our growth plans and changes the trajectory of our business.”
Another prominent ACT developer said the unprecedented method of calculating LVC at Dairy Road and its exorbitant outcome was reverberating across the industry in Canberra.
“It is completely at odds with the government’s own infill policies,” the developer said.
“We need clear, consistent tax charges that enable housing supply and vibrant precincts; otherwise, we all lose.
“If the methodology and the assessment of $101 million stands, no private developer can viably deliver mid to large-scale infill housing in the ACT.”
Property Council ACT executive director Ashlee Berry called on the government to genuinely review the lease variation charge and reset the balance between capturing land value uplift and supporting the delivery of homes and critical infrastructure across the Territory.
“With housing delivery now more critical than ever, the system must provide certainty, transparency, and consistency, not hinder project feasibility,” she said.
Molonglo says it supports a fair and transparent system that funds community infrastructure and delivers housing.
It called on the Commissioner to withdraw the appeal and for industry and government to work together to show how public good and private initiative could coexist.
“Canberra can’t tax housing at this rate and expect homes to be built. It’s crushing,” Mr Kalogeropoulos said.
“We are ready to deliver 408 new homes designed by internationally renowned David Chipperfield Architects, which would mark Canberra’s most significant example of architecture and ecology working in concert, and yet, we can’t start.”
He said the appeal raises questions about the credibility of the ACT Revenue Office.
“The public have made the connection that this office – whose LVC demand on Dairy Road is an extraordinary $75 million above what ACAT deemed fair and reasonable – is the same office that sets our residential property rates,” Mr Kalogeropoulos.
A government spokesperson said the ACT Revenue Office was independent of government.
An ACT Revenue Office spokesperson said it was not appropriate for the Commissioner to comment on this matter as it is a legal matter.
Chief Minister Andrew Barr said last week the government is open to being flexible on tax and planning rules to mitigate some of the risk associated with housing proposals, but it would want to see some community benefit in return.
Mr Barr said this could be in the form of offsets for community infrastructure or flexible payment schedules to ease cash flow.
But he said it couldn’t just be a private windfall gain.
