Prosper Australia

Todays Age article on Land Tax Cuts Wont Bring Savings alerts all those interested in defending the communities right to a share of the free lunch land prices reflect. The next few weeks will see the property lobby step up their claims to pay less and less of the one tax their army of accountants can’t dodge.

Some points we agree with. The article states that the State Land Tax cuts over the last 3 years from 5% to 2.5% for the top marginal rate have been offset by rising land prices. Suprise, suprise! Lower holding charges on land encourage more speculation, especially at the top of the market, where capital gains have been higher in both percentage and nominal amounts in many suburbs.

What we do agree with is the warning on bracket creep. The Brumby government should index Land Tax rates to CPI or ultimately to land prices as calculated by the Victorian Valuer General.
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The front cover of today’s Herald Sun has a huge photo of Horse Stud owner Steve Spiteri (looking hard done by!) with a caption: ‘Thanks Premier: Steve Hits Paydirt’. Yesterday’s announcement to rezone all land residential within Melbourne’s 2030 boundary has made landowners, typically land bankers and the occasional farmer on the edge of the sprawl, rich overnight. Mr Spiteri bought his property for $375,000 twelve years ago and with the new zoning is now estimated to be worth $11 million dollars.

How much money will Spiteri make when he sells the property? Lets give him a million dollars for council rates, real estate commissions and to cover the next few years Land Tax (about $330,000 p.a). If we assume he pays capital gains tax at 30%, he will take home over $7 million dollars. This equates to more than 122 years income for the average wage earner.

That’s as if he’s earnt $11,217 per week for the last 12 years. Staggering!
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Sharon council mulls land value tax after presentation by economics official (15/03/07).

Joshua Vincent from the Center for Economic Studies, Philadelphia, provides the data on why switching away from Capital Improved Valuation to Site Valuation is of economic benefit to your community.