By Tina Perinotto

20 April 2011 – Updated:
The federal government has axed the $1billion tax breaks for green buildings program from the coming budget and put it up for consultation for 12 months after a storm of protests from the property industry about its design.

The Energy Efficiency Council  said the move would damage the emerging retrofit industry and cost money and jobs while electricity prices skyrocketed because of spending on “poles and wires”.

EEC chief executive officer Rob Murray-Leach  called for funds from the scheme to be urgently diverted to the now closed green building fund.

“Improving the efficiency of Australia’s offices, hospitals, schools and shopping centres would deliver a major boost to Australia’s economy, saving businesses $1.6 billion a year,” Mr Murray-Leach said.

“At the same time, retrofitting could create 27,000 jobs over the next decade, including jobs for builders and engineers.”

The property industry said it supported the proposal to improve the scheme’s design but was disappointed with the delay.

Assistant Treasurer Bill Shorten yesterday said the government had decided to delay the scheme for 12 months from its former 1 July starting date this year and would conduct “further consultations around the Tax Breaks for Green Buildings program to deliver the best outcomes for industry.”

He said: “We understand that during initial consultations, some sectors of the industry were concerned about how the scheme would operate.”

A round table would now be convened and headed by an independent expert to work through the issues.

According to some sources the scheme was nearly axed altogether, as it came under heavy pressure from the Department of Finance to find big spending cuts for the upcoming federal budget.

The program, which offered a one-off bonus tax deduction of 50 per cent of the cost of the eligible assets or capital works, was designed to help old energy intensive buildings improve their environmental profile in terms of energy, but the industry said the scheme was badly designed.

It was not useful to real estate investment trusts, which own a big proportion of the major property investment stock. And it was also too narrowly focused, critics said.  For instance, requirements in the scheme that improvements in building work deliver two extra NABERS Energy stars would be too hard to achieve in some cases, industry experts have told The Fifth Estate.

The Parliamentary Secretary for Climate Change and Energy Efficiency Mark Dreyfus said that while consultation on the scheme will be extended by one year, “it will still provide $1 billion in support to the property industry over eight years to improve the energy efficiency of older, less-efficient buildings around the country.”

According to Mr Dreyfus issues raised include whether the benefit should be provided as a bonus deduction (as proposed) or as a refundable tax credit, whether the program should support re-fits for buildings that are already rated above two stars on the NABERS rating system, and whether the program should provide more tailored support for the refit of hotels.

The Property Council of Australia chief executive officer Peter Verwer said delays to the scheme were disappointing but that it was important to get the design right.
“Our view is that it’s disappointing that the government couldn’t accommodate the industry’s proposals to improve the scheme within the current time frame,” Mr Verwer said.

“However from a practical perspective the enabling legislation will still be introduced this year and the other thing they have announced is that they are upgrading the consultation.”

Mr Verwer said the scheme’s poor consideration of real estate investment trusts was a major problem.

“The scheme as it was designed couldn’t be used at all by collective investment vehicles; it couldn’t be used by the funds, that are owned by millions of Australians through their super funds.”

He said the United States had already recognised this deficiency in its incentive program and rectified its programs.

“President Obama in his State of the Union Address said that he was changing the investment allowance for building retrofits to include REITS. Americans have had a similar scheme for some time. And they recognised it didn’t work without including the REITS.

“It was a simple matter to fix. We proposed in detail how that will occur and the government said now it will take that on board but they are also looking at other design flaws in the announced scheme, which was far too rigid in its application.”

Mr Verwer said he was happy that the government had decided the round table should be chaired by an independent expert rather than an inhouse representative from the government.

Green Building Council of Australia chief executive officer Romilly Madew said the GBCA supported the moves to improve the design of the scheme and that it was important that the scheme be as inclusive as possible.

“We believe the $1 billion dollar program will provide long-term benefits to the industry, and so must be carefully considered as part of an integrated strategy to improve the environmental performance of Australia’s buildings,” Ms Madew said.

“To capitalise on the carbon abatement opportunities of Australia’s built environment, the Tax Breaks for Green Buildings program must be as inclusive as possible, to ensure the largest possible number of Australia’s buildings can benefit.”

The Energy Efficiency Council’s Mr Murray-Leach said: “Of course, the Government needs to get the design right, however, if the Government doesn’t immediately announce some measures to fill the gap that they’ve created it could stall the industry and cost jobs.

Rob Murray-Leach

Mr Murray-Leach said the Council recommended a mix of measures. This included:

  • using funds from the Tax Break scheme to top-up the green building fund
  • saving taxpayers’ money by improving the efficiency of the government’s own buildingsa national energy savings initiative to replace several existing state-based schemes
  • energy market reform, particularly tackling barriers that prevent cogeneration systems being connected to the electricity network.

Mr Murray-Leach said energy efficiency in the building stock could deliver $1.6 billion of savings to businesses each year and a  retrofitting program could create 27,000 jobs over the next decade.

He also said energy efficiency would help keep energy prices lower.

Prices were rising “due to network companies spending over $39 billion on poles and wires – expenditure that is passed straight on to consumers. Investing in energy efficiency would save money on poles and wires, saving households and businesses money.

“The Townsville Solar City project recently reduced peak demand on Magnetic Island by over 20 per cent, postponing $17 million of expenditure on an undersea cable.

“The Prime Minister’s Task Force recommended a National Energy Saving Initiative that would cut investment in infrastructure by $12 billion, reduce energy prices and save households up to $296 a year. This isn’t radical – California and the UK have been doing it for years.”

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