Sometimes common sense does come into play, even in the frantic lead up to the State Budget.  The State Government has announced a moratorium on the implementation of Western Power’s collection of the tax on Capital Contributions.  For those that didn’t read last week’s article, when developers donate electricity infrastructure or give cash for its construction, it is brought into Western Power’s books as income, generating an income tax liability which was to be passed on to homebuyers.  That tax payment goes to the State Government not the Federal Government.

The moratorium is not the end of this matter, just a pause whilst the government assesses the impact that this tax could have on housing affordability and, more broadly, the state economy. We strongly support this impact assessment as there is currently a policy gap.

The issue with Western Power’s tax liability on capital contributions was triggered by the attempt to create competitive neutrality with the private sector.  Given that premise, it is interesting to contrast Western Power with the privatised energy provider ATCO Gas Australia.  The Canadian based company owns, operates and maintains the largest natural gas pipeline network in Western Australia, servicing Geraldton, Kalgoorlie, Albany, Bunbury, Busselton, Harvey, Pinjarra, Brunswick Junction, Capel and the Perth greater metropolitan including Mandurah, a coverage similar to Western Power.

Both Western Power and ATCO Gas are regulated by the Economic Regularity Authority and Energy Safety, with both providing for the transmission of energy through their infrastructure.  It should be noted that ATCO Gas also generates energy and now competes for their market share for end consumers with other providers, where as Western Power is a transmission entity only.

The relationship with homebuyers however, is completely different.  Whilst developers pay for and donate infrastrucuture to Western Power (and may in the future be required a cash donation to cover the tax liability), ATCO Gas Australia pays for their own infrastructure.  The only requirement for developers  is the coordination of the installation with other services to remove the cost of digging a separate trench.

This is not a column promoting privatisation, rather it was written to highlight the possibility for new homebuyers not to be buried in infrastrucutre costs.

Our thanks to the Treasurer’s and Premier’s office which responded appropriately to this complex issue and we look forward to working towards a permanent solution which does not impede housing affordability.

And I look forward to never writing another column on the tax on capital contributions.