6 November 2018
The Hon. J.A. DARLEY (15:05): I seek leave to make a brief explanation before asking the Treasurer a question about land tax.
The Hon. J.A. DARLEY: In the budget this year it was advised that land tax relief will be provided as of 1 July 2020 with the tax-free threshold increasing from $369,000 to $450,000, and the top rate of land tax being reduced from 3.7 per cent to 2.9 per cent, resulting in a reduction in total land tax receipts of approximately $20 million. Can the minister advise of any reason or reasons why the estimated land tax receipts in the following financial year 2021-22 are likely to rise by $17 million?
The Hon. R.I. LUCAS (Treasurer) (15:06): I am happy to take the question on notice but I suspect the answer is that as a result of valuation increases which are being initiated by the Valuer-General under a program—partially, I should say, under a program initiated by the former government in terms of the revaluation initiative. I suspect that is in large part what is driving the potential increases in land tax, even though there will be a significant reduction in the rate of land tax that is being levied by the government at that particular top rate from 2020 onwards.
I am happy to take the question and bring back a more detailed response but I think the simple response is that clearly the government's actions in the budget will lead to a reduced collection of land tax but if, at the same time, overall valuations are increasing or a significant number of those valuations are increasing, then even the reduced land tax regime that the government has announced will lead to increases in revenue from the mere fact of the impact of that particular initiative on valuations across the state.
Answer to Question
6 December 2018
The Hon. R.I. LUCAS (Treasurer): The 2018-19 budget estimated that total private land tax collections would be $405 million in 2019-20, $379 million in 2020-21 and $390 million in 2021-22.
The estimated fall in private land tax collections in 2020-21 reflects the impact of the introduction of the government's cuts to land tax from 1 July 2020. This includes an increase in the tax-free threshold to $450,000 and a reduction in the rate of land tax from 3.7 per cent to 2.9 per cent for the value of taxable ownerships between the existing top land tax threshold (currently $1.2 million) and $5 million.
Land tax thresholds are currently increased annually in line with average increases in site values as determined by the Valuer-General. This minimises the impact of bracket creep (increasing property values pushing landholders into higher tax brackets). Annual thresholds will continue to be indexed following the government's changes to land tax.
In 2021-22, total private land tax collections are forecast to increase by $11 million, or 2.8%. This increase reflects expected growth in underlying site values subject to land tax.
Land tax assessments are based on valuations undertaken by the Valuer-General. In the 2016-17 budget, additional support was provided to the State Valuation Office to undertake improvements in the processes for the Valuer-General's valuations of properties in South Australia. This initiative is expected to improve valuation accuracy through additional data collection and revaluations to inform site and capital value assessments for prioritised property classifications and locations where required. Growth in underlying site values subject to land tax over the forward estimates incorporates the expected impact of the property revaluation exercise being undertaken by the Valuer-General.
When the previous Labor government announced the property revaluation exercise, they did not disclose the expected impact on land tax revenue. Instead, this impact was held as a contingency. As part of the 2018-19 Budget the Liberal government included the estimated impact of the revaluation exercise in headline land tax estimates. As disclosed in the 2018-19 budget, the property revaluation exercise being undertaken by the Valuer-General is estimated to increase underlying land tax revenue by around $19 million by 2021-22.