SA Government to stick with land tax crackdown but proposes lower top rate
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The South Australian Government has refused to back down on its controversial stance on land tax aggregation in return for lowering the rate of the levy by more than promised and more quickly.
Key points:
- The SA Government plans to crack down on property owners splitting their portfolios to pay less land tax
- The plan has angered land owners, party donors and Liberal backbenchers
- It is standing strong on the crackdown but will lower the land tax rate
Treasurer Rob Lucas last night announced the State Government would continue with its plan to prevent people from splitting their properties into different names and trusts to lower their land tax bill.
However, he said that would be offset by reducing the top land tax rate from 3.7 per cent to 2.4 per cent from July 1 next year.
The Government had announced in June’s state budget that it would lower the tax rate for property portfolios worth $1.3 million–$5 million from 3.7 per cent to 2.9 per cent from next July, with a slower reduction for those worth more than $5 million.
While the rate reduction has been widely welcomed, the plan to tax individuals’ properties as a whole rather than their separate entities divided the party and angered donors.
However, Mr Lucas said the new plan had received unanimous support in the party room yesterday.
“There was no opposition expressed at all — we’re going out to consultation immediately,” Mr Lucas said.
As announced previously and promised before last year’s state election, the tax-free threshold will increase from $391,000 to $450,000.
Land tax revenue still falling
The aggregation crackdown will raise an extra $86 million per year for the Government according to the latest figures released last night, up from the $40 million the Treasurer had predicted in the budget.
Overall, though, Mr Lucas said $70 million less land tax revenue would be collected by the Government over the three years because of the lower rates.
The Government said under the changes, 4,300 individuals and 2,600 company groups would pay more land tax, compared with 47,800 individuals and 7,900 companies which would pay less land tax.
“We’re going to stop the situation where someone can own $3 [million] or $4 million in property and not pay a single cent in land tax because they structure themselves into a complex series of trusts or companies,” Mr Lucas said.
Analysis commissioned by the Government showed there were 22,300 South Australian property investors — including 16,300 individuals — who owned multiple properties but did not aggregate them under different entities.
“It blows out the water the claims from the Property Council and others that everyone who has multiple properties has actually structured themselves into trusts and properties to minimise the tax they pay in South Australia,” Mr Lucas said.
Labor has not said whether it would support the changes.
Shadow Treasurer Stephen Mullighan said Parliament needed to see the full details and modelling.
“A family or a retiree with a small number of investment properties will receive a land tax bill thousands of dollars higher, while large corporates with millions of dollars of land ownings will receive tax cuts in the tens of thousands of dollars,” he said.
Aggregation opposed by property groups
Property Council SA executive director Daniel Gannon said the reduction in the top rate was welcome, but it still opposed the aggregation changes.
“If aggregation is still part of the plan, it’s not a plan that we support because it’s incomplete and underdone,” Mr Gannon said.
“Given the Government now accepts its $40 million revenue forecast was inaccurate, how can any investor — big or small — trust the latest figures and calculations?
“Statewide property revaluations will deliver $75 million every year if valuations increase by 10 per cent, let alone the tax tidal wave caused by changes to aggregation.”
The Property Council held a lunch last week where major property owners spoke out against land tax aggregation, saying it would lead to less investment in the state.
The Government says its proposal will bring SA’s laws in line with those in New South Wales and Victoria.
Majestic Hotels owner John Culshaw urged property owners to stick up their middle finger at the Government.
“People will walk from the state … they will walk,” he said.
Real Estate Institute of South Australia general manager Andrew Shields said Mr Lucas’s proposed changes would not please his industry.
“Not at all,” he said yesterday.
“We see this as a missed opportunity to be innovative as opposed to being reactive.
“We know there is a GST black hole and this is what we see as an easy fix.”
Consultation is open until October 2.
The Government plans to introduce the new laws to Parliament on October 15.
Topics:
tax,
business-economics-and-finance,