South Australia's Property Valuations System
John Darley, MLC, Advance SA (5AA 9.11-9.24) South Australia’s property valuations system: land tax
[Robin Hood theme music](Byner: Well there’s a reason I’m playing that … there’s been a rigorous discussion … about changing the valuation system back to what it was in 1979 … the Valuer-General is arguing more information on properties needs to be collected in her database … the sting … some property values may skyrocket, particularly in the city, by 100% … it’s city properties in the firing line where values will massively rise but … your Emergency Services Levy, sewerage, land tax, council rates, zero waste, NRM are all based on these values … massive cost increases if you cop it … in a few weeks this is likely to start … a cost impost that will ripple through the entire community … the wealth of a person or capacity to pay has very little relationship to the value of their property because most home owners … couldn’t sustain a loan based on today’s value. Businesses … have got to pass on all costs they incur which means we could well be in for a big tax hike … we made a request to talk to the Valuer-General … she’s not available … a State Government spokesman has said that this program will reset the valuation base to market levels … no comment at all on the expected revenue windfall … this needs to be out there and openly discussed before an election … John Darley … a former Valuer-General … explain this to us) … the first thing we need to understand is that the Valuer-General’s valuations have absolutely no impact on the revenue raised by SA Water, Emergency Services Levy or council rates because they all work for their own budget … the Valuer-General’s valuations are only used to apportion the tax burdens between taxpayers … the thing that concerns me … it’s a $15.4m project that was due to start in July 2016, we’re now told it will start later this year … the five year project it says they’ll be collecting additional information … that’s in order to enhance their computing systems … the problem with that is that we looked at that over 20 years ago … it’s a labour intensive exercise where the value and property services officers have to pick up more physical information about properties and the cure becomes worse than the disease. The current computing system they have does the job and they can quite easily adjust where there’s differences in relatively between valuations … the other interesting thing … if you’re gonna spend … $15.4m on this project what was the justification for doing it? Is there going to be an increase in valuations or a decrease? And the Valuer-General says she doesn’t know … which Government is prepared to punt $15.4m on a system that they don’t know what the outcome is going to be? (Byner: … the Valuer-General as I understand it … says that they were told that some city valuations could be up by 100% so they do know …) yeah … in the question that I asked they had no idea … following that revelation to the Property Council with 100% … the increase … in some residential properties this year … a property that – and this is a house for rental properties – the valuation increased 16%, the impact on land tax was a 30% increase in land tax … if you look at properties in Rundle Mall … if they go up, increase up to 100% the corresponding land tax increase is going to be absolutely phenomenal. (Byner: Does the Government understand what this is going to mean?) I don’t think they do … the Valuer-General doesn’t really care.
Daniel Gannon, Executive Director, Property Council SA (5AA 9.17-9.20) South Australia’s property valuations system: land tax
(Byner: Daniel Gannon … what did the Valuer-General tell you?) … this exercise … won’t just hit owners and tenants of commercial properties, it’ll also have a direct and massive impact on every South Australian who owns a property and on every South Australian who rents a residential property … we know that property taxes everywhere you go they’re a trigger for higher land tax bills, a trigger for higher council rates … we already have the highest council rates per capita in the nation … they’re a trigger for … higher water bills and ESL, they’re a trigger for more taxation … we’re not against recalibrating valuations, if they need to rise then that’s the will of the market. But improving valuations without improving land tax is only fixing half the problem … it’s like buying a bucket for the leak without fixing your roof … the way the Government’s been behaving for the last six months, they’ve been behaving like the three wise monkeys … refusing to lower land tax rates or even discuss a lowering of land tax rates at the same time that they’re looking to increase valuations … double valuations in some cases in the CBD … here’s the bad news for your listeners: more than one million South Australians have a stake in the property industry through their superannuation fund … an anti-competitive land tax regime has a direct impact on the mums and dads across South Australia therefore eroding their nest eggs … this has far greater consequences than the Government has cared to acknowledge to this point. (Byner: So what’s your belief that this five year valuation is gonna do?) … like any tax on business costs have to be passed onto consumers whether you’re a tenant in a commercial or retail building or whether you’re a tenant in a residential property, land tax increases your rent … renting will be more affordable if this tax was more fair and more equitable … the solution … is a very simple one; the Government needs to lower the top land tax threshold, it needs to reform land tax to a more equitable level, to a level that actually reflects the national average which is about 1.9% at the top end, we pay 3.7% … we need to do this to increase the attractiveness of South Australia … a national case study … let’s look at retail property. The average combined cost for land tax and council rates per square metre in South Australia is 161% higher than New South Wales, 73% higher than Victoria and 66% higher than Queensland, this is out of control.
Back to John Darley
(Byner: John Darley, what do we do about this? This is going to happen isn’t it?) Well we’re going to have to put pressure on whoever is in Government to review the situation … would you spend $15.4m of taxpayers’ money on a project that you don’t know what the outcome is going to be? I mean, certainly not. And the situation is at the present time … the objection rate to valuations is less than 1%, 8,000 property owners object each year to their valuation out of 800,000 … what’s the justification for this? … I cannot find any evidence of any research that they’ve done that suggests … by wasting money on collecting all this additional information is going to add one iota to the accuracy of the valuation. (Byner: Is it your view … a lot of property values will rise and this is going to put an extra cost burden on those people who own those properties?) … we don’t know, some will rise, some will fall but we don’t know what the net effect is … for land tax if property values rise we know that the multiplying effect that’s going to have on land tax … the Under Treasurer’s said if that happens the Government is going to have to rapidly adjust the rates in the dollar for land tax … land tax is always passed on through businesses to the purchaser of the project … if land tax increases 30, 40, 50, 100% I mean, who’s going to pay? This is the point … (Byner: this is also planned for all properties not just business, isn’t it?) No and it’s for all properties over a five year period … what the Valuer-General doesn’t understand … they’re currently doing valuations every year … that’s what the Act requires. If she starts doing … a fifth of the properties each year she’s going to be in breach of her own legislation because the valuations will not be consistent. (Byner: … has there been a complaint against you with Treasury and Finance?) Not that I’m aware of. (Byner: No? Just a question that was put to me that’s all.) Yeah … we’re trying to find out what the issue is. (Byner: So your advice to the people of SA? Surely this is an election issue isn’t it?) Absolutely … we should … make sure that every political party, Labor or Liberal or Xenophon is aware of this situation and all hell will let loose if land tax increases as a result of this process. (Byner: … thanks John Darley … I took the liberty of talking to Michael O’Neill … I asked him what his take on all this is … he said the Valuer-General can enrich the database and get more information on properties without the necessity of a five year rolling valuation … we already have some of the highest costs in the country and this would only make it worse. Let me read you some of the comments attributed to the Valuer-General: “This process will facilitate the opportunity for consultation with stakeholders” … “As is currently the case property owners will be encouraged at this time to bring any of their valuation concerns to the Valuer-General where they can object.” Well that’s hardly news … “The re-evaluation program seeks to improve the quality and accuracy of the existing database.” Look, I think everybody with half a nose can tell that you wouldn’t do this if you weren’t going to get more revenue.)