Level 1, 30 Collins Street
Melbourne VIC 3000
As the effects of Land Tax for 2019 start to bite it raises the question “Why would the powers that be make any changes to reduce its impact?”A Bipartisan Approach to Land Tax perhaps?
The impact of ‘bracket creep’ as a result of a system that has not altered the tax brackets in 10 years is profound.
As an example, a property with a value of $1.7M in 2013 had a land tax bill of $3,775.00 Allowing for the heightened values over the past 5 years, if that property was worth $3.1M in 2018 the land tax is now $27,225.00
Mum and Dad investors have been caught up in the Wealth Tax and there are no signs of relief anytime soon.
Given the ‘cooling measures’ that have been instituted over recent years including additional imposts on foreign investors and the elimination of stamp duty savings for ‘off the plan’ purchases, the volume of sales has reduced markedly resulting in less stamp duty income for the Government to balance its books.
It is no surprise then, that land tax revenue is essential and any increase is required to offset the reduction in stamp duty revenue.
Would it not be a fairer system to have a base level of land tax applied across the spectrum and a second tier of tax that would be applied in the event that one sold a property in any given year where the value was above the base level?
This could work as a form of Betterment Tax where a fee is levied on land that has gained value (usually this is defined as being where public infrastructure investments have been made).
It is fundamentally flawed to be taxing land owners on the basis of notional value, particularly where a property may be encumbered for some years via a lease. Likewise, if the owner is not realising the value during the period in which the tax applies it is inequitable.
Under a Betterment Tax styled system, if they sell in a year where the property value is up they pay a premium, if the price is subdued then the baseline tax would be the only tax payable.
This would appear to be a fairer and more logical approach to the matter of Land Tax but as we know . . . fairness and logic are not things we generally get from either side of politics.
Raoul Salter – Associate Director