The State Government has come under more pressure from the property lobby in Government Criticised for not cutting Land Tax
“The Treasurer should have provided stamp duty and land tax relief as measures to stimulate demand for property investment. They could have done that by increasing existing thresholds or reducing rates.” said TressCox Lawyers partner Michael Westaway
Commercial agents have reported that land tax bills for some prominent city buildings have soared by as much as 100 per cent. These are passed on to commercial tenants on net leases, who are finding the increases bear no relation to the financial health of their business.
That is because land tax is based on valuations taken every two years, and the last valuation was in December 2007, at the height of the property boom.
It also reflects the removal of a cap previously limiting annual land tax increases to 50 per cent.
The government continues to walk into these policy traps. It makes moves like removing the 50% cap but yet doesn’t ensure property is valued annually. With regards to this week’s State Budget, we would have preferred:
- Stamp Duty abolished
- Payroll Tax abolished
- Higher and flatter Land Taxes
- A lower Land Tax threshold
- Yearly land valuations
Many of these issues were promoted in the 2001 Harvey Report into State taxation. Both John Brumby and John Lenders were key signatures to that report.
The real estate industry would approve of the impediment that stamp duty provides to property turnover.
Small business would applaud the removal of payroll tax.
To overcome the misunderstandings of Land Tax, these reforms would need a major public education program to show that the efficient use of land is in everyone’s best interests (even the speculator’s):
- From this the aussie battler commuting an hour each way to work would see a raft of speculative vacancies hit the market at once in inner Melbourne. They could live closer to town.
- Public transport users frustrated with delays would see this form of Land Value Capture add to the state’s coffers such that new trains and services could be afforded. Just look at how profitable Japan and Hong Kong’s PT systems are based around this system.
- Speculator’s could be thrown a carrot – we will build you more infrastructure and give you the majority of the upkick in land values if you give back to the community just one third of the resultant bounty.
- The resultant cheaper land prices would encourage more small business to start up, lifting the demand for employment. Higher wages due to lower rents. Sound fair?
A lower Land Tax threshold (why not abolish it, it does nothing for affordability) would win over genuine small builders with the price of an affordable block of land falling. Has anyone noticed that as the threshold has been forced up, so has the price of vacant land in once affordable suburbs such as Footscray and Sunshine?
Yearly land valuations would remove the shock of these massive land tax increases. Political acumen please!
Ironically, it is the tiny percentages that speculators and property investors are paying in Land Tax that enables them to pass on the tax. If a higher rate was charged (ie at least half of the yearly bounty gain) then these prime locations would be developed to their full capacity.
With the Melbourne City Council looking to improve density, planning restrictions on height should be streamlined. We must build upwards if we are to create the walkable cities we need in a climate challenged future. All we are talking about is 4 stories high as a preferred density in the city and along some transport corridors. What percentage of the CBD’s buildings are 4 stories high? Barely 50% at best we hazard to guess.
The problem is compounded by the Kennett government putting the screws on genuine development with the fallacy of CIV council rating. Why should the family home pay more than 30%+ in rates than the vacant land speculator?
Join our e-list (top right home page) or take out a trial subscription to our Progress Magazine so we can avoid the speculative bubbles that continue to threaten capitalism every 18 years.