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Increasing Land Tax and Property Valuations

Radio Broadcast

John Darley, MLC, Advance SA (5AA 10.08-10.17) Land tax & property valuations

(Byner: There was a big story over the weekend that Adelaide home values have hit an all-time high … the problem … we have this very futile system in South Australia where if you are notionally wealthy … if your house sits on some dirt whose value increases, it is decided your capacity to pay is commensurate with that increase in value … all the levies you pay … are all based on this number that the Valuer-General will give you … are you wealthy enough to pay these extra taxes? Have you had an increase in your wages or your pension to match this? No, oh your building’s worth more. What, so you can go out and hock it? Not exactly … John Darley … our rates and taxes are about to skyrocket …) first off, I was encouraged to hear the Premier say this morning that he’s going to de-corporatize SA Water, how long have we been arguing about that that SA Water should be de-corporatized and put in charge of the Minister? Anyway … this situation where the Valuer-General says ‘property values have increased,’ we know that with SA Water rates, sewerage charges, Emergency Services Levy, NRM levy and council rates those agencies set their own budget and the valuation of the property are used to apportion the tax … with land tax it’s the other way; whatever change occurs in land tax it’s reflected in the land tax that’s paid … a couple of weeks ago I had a person coming in and told me … they had a residential property that they were renting out, the valuation had gone up 15% and the land tax increased 30% … we know also that the Valuer-General’s embarked on this crazy scheme, the Government’s allocated $50.4m … over four years and she’s going to do an annual review of a fifth of the State every year to bring their valuations up to speed … that’s going to be in contravention of her own act … the act says her valuations have gotta be consistent or relative each year because she’s doing annual valuation … (Byner: if that’s in contravention of an act, bet you can’t do it.) Well no-one seems to worry about that … (Byner: oh really?) And she doesn’t even understand it’s in the Act [Byner laughs] but the real impact is going to be we all know that land tax, were it paid by non-residential properties other than rental residential properties, you’ve got commercial, industrial, you’ve got supermarkets … they pass this land tax on so that every [unclear] you buy or you achieve from a service agency is going to have a component of land tax in it … (Byner: that’s not quite right because I spoke to Peter, he showed me his land tax bill and I said ‘Have I got your permission to make this public?’ He said ‘Yes’ … I said ‘When you pay this nearly $3,000 a week surely you would have to factor in all of the product you sell at money.’ He says ‘I can’t afford to … mate, if I’m not price sensitive my customers won’t buy, so guess what it’s gotta come off the bottom line.’ How the hell do you run a business and sell anywhere near enough just to cover that? It’s impossible.)[inaudible] (Byner: Hit your phone, John, it’s playing up … I’ll get my producer to get you back.)

Daniel Gannon, Executive Director, Property Council SA (5AA 10.12-10.15) Land tax & property valuations

(Byner: Now Daniel Gannon … tell us about these increased taxes and charges as a result ‘oh, you’re wealthier now, your property’s worth more, therefore your capacity to pay is commensurate,’ what do you think of that?) Look, it’s completely outrageous … if you rent or own a property in South Australia … you pay property taxes … loaves of breads, cartons of milk, nappies for your toddlers even if they’re at your local these costs can be passed onto consumers by owners of property and owners of buildings … there is a question about price sensitivity for a lot of these landlords and owners … the reality is that these costs can be passed on … the most damaging property tax that we have in South Australia is land tax … it unfairly punishes owners and households … not just tax as the Government might have you think … it’s a tax on all South Australians … we really don’t have a top end of town, we’d love to have a top end of town, an investment destination that investors look at and want to sink their capital into our State but we’re not quite there … property taxes can be a trigger for higher land tax bills and they’re already the most anti-competitive in the country, they can be a trigger for higher council rates and they’re already the highest per capita in the nation … we’re not against recalibrating valuation … the property sector is not against resetting valuations, if they need to rise then that’s obviously the will of the market … if we improve valuations of property without improving our land tax regime, our anticompetitive land tax regime, we’re only fixing half the problem; it’s like buying a bucket for the leak without fixing … (Byner: what is it you’re advocating?) … if you look at retail properties the average combined cost for land tax and council rates per square metre in South Australia, it’s 161% higher than New South Wales, 73% higher than Victoria; what we want is a fairer system … our top tier of land tax is 3.7% so we charge 3.7% for owners of land above $1.176m cumulatively … even if it’s just two or three average priced properties in South Australia you are sitting in the top tier of taxation when it comes to land tax in South Australia … our top land tax rate is 3.7%, the average for other jurisdictions around Australia that charge land tax … 1.9, so we are double the national average when it comes to land tax and what that means in a market like South Australia is that we are punishing those … who own property as part of their superannuation, we are eroding nest eggs for South Australians because we have an anticompetitive land tax … we need to drop that rate … to a more competitive level in line with the national average at 1.9% to encourage investment in our State.

Back to John Darley

(Byner: So John, what are you gonna do? Is there anything you can do or advocate … what do you think is the answer to this?) I’m pursuing the Valuer-General and Treasury to modify … to change this situation … with business generally as land tax and other taxes increase if you can’t pass them on you go broke … we know for a fact that people are buying houses to rent out and providing rental accommodation, by the time you take into account land tax and these other taxes your return rate, your net return is around about 1% … no-one is going to invest in those … it’ll be less rental accommodation available, if businesses can’t afford to pay their taxes they’re not going to subsidise people, they will just close the business and that’s what’s happening … (Byner: the person who gave me his bill which is nearly $3,000 a week, he said … ‘I can’t make a living out of this’ and they’re already working 16, 17 hours a day … we really have to have a good look at this.)