Your views: on extra freeway lanes and land tax
Today, readers continue to fire up about the State Government’s changes to land tax and question the latest plan to reduce congestion on the South Eastern Freeway.
The South Eastern Freeway. Photo: Tony Lewis/InDaily
Following this story on the proposed land tax aggregation changes, I feel that I must have been the only person in the state playing by the rules. Yes, I owned three rental properties and, yes, my land tax bill reached over $30,000 at one point. I have since made changes to lower this, in one case by subdividing and allowing people to purchase their first home in a desirable area, enabling me to reduce debt and to take advantage of other investment opportunities.
Whilst I agree that the highest rate needs review, one thing that I have yet to hear mentioned in this argument is that being a state tax it is deductible against income tax, just like other costs incurred. – Stephen Harnett
Two weeks ago I emailed the Treasurer for clarification of the Budget announcement but have not received a response.
We provide low-cost rental housing in Adelaide. We also run a hospitality and tourist accommodation business in Adelaide and country SA.
By definition low-cost housing (other than that supported by government subsidies) has a high land component in its value. It usually comprises older, run-down, but perfectly habitable properties in desirable locations. The owner makes a net return on capital in the order of 1%. And it’s a lot of work. Currently, land valued at less than $369,000 is exempt from land tax. From there up to $677,000 the rate is 0.5%. From there to $985,000 the rate is 1.65%. It is 2.4% from then until $1,231,000. Beyond that, the rate is $3.7%.
The problem for property owners of multiple properties is that, in South Australia, the value of all properties under the same ownership are aggregated. So whilst one property with a land value of $400,000 would incur a land tax bill of $155, two such properties would incur a land tax bill of $3569.50, and for three such properties the land tax bill would be $11781.97 or $3927.33 each or $75.52 per week …and we haven’t yet hit the top rate of land tax.
If the three properties were part of a larger portfolio and were all subject to the top rate of land tax the bill would be for $44,400 per annum, or $14,800 per unit or $284.61 per week per unit. There are many low-cost rental properties which would not achieve this rent, let alone cover Emergency Services Levy, sewerage rates (another property tax), council rates, let alone repairs and maintenance on the property.
Our tourism accommodation business consists of six townhouses on the beach. If the changes announced in the budget are brought in, it would result in an increase in land tax of $88,000 per annum or $1692 per week. Holidays in Bali are advertised at a cheaper rate than this. If the changes are introduced we would be forced to close our business of 15 years’ standing.
This is clearly one of those taxes which, at the top rates, no-one can really pay. Separate ownerships are taxed separately, so holders of multiple properties have long done what is the only feasible option which is to hold properties in individual ownerships.
What the changes announced in the State Budget achieve, as I understand it, is to look beyond the ownership structure and attribute ownership to the ultimate shareholder or unit-holders of the property which will result in the imposition of those unsustainable levels of land tax outlined. These changes without substantial reform of the rates and thresholds will make it impossible to deliver low-cost rental accommodation to low-income households and will be a significant barrier to the tourism accommodation sector.
South Australia’s land tax rates are totally uncompetitive with other states.
I have always been critical of the previous Labor government’s strategy of a high taxing environment which subsidised those businesses that it saw as winners. I was hoping that the current government would make SA attractive to investors by putting this state on a competitive footing with others. This change would keep us as the least competitive and least attractive state in which to do business in the country.
The last time a Liberal Government made changes to land tax was, I think, in the late 1980s when the vast majority of property owners (that is homeowners) were exempted from paying land tax. The massive shortfall in income led to the introduction of the hugely unpopular ESL and the ousting of the Liberal Government at the next election. Déjà vu. – John Wyk
Commenting on the story: Section of SE Freeway to be upgraded to three lanes
What are they talking about?
With the exception of a tiny stretch at the off ramp into Crafers there are already three lanes in both directions and that part, which is about 30 metres long, goes under a downward sloping bridge which goes over the freeway. What are they going to do? Close that bridge/road which leads up to Mt Lofty, into Crafers and back onto the freeway just before the off-ramp in Stirling and then into the nightmare that is the entrance to Stirling?
Come out and check it all out for yourselves. I use this part of the freeway almost every day. – Robert McCormick
While they’re at it, how about including two or three sorely needed wildlife overpasses/bridges? – Andy Porter
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