The Napthine government is determined to limit land supply and thereby further increase the cost of land for all in Melbourne.

The price of freshly subdivided land on the outskirts of cities affects the market all the way to the centre.  Constricting peri-urban supply has profound implications.

Victoria’s State Revenue Office announced the exemption from State Land Tax for all broadacre landowners within Melbourne’s Urban Growth Boundary in a bulletin out this morning:

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Land Tax Act 2005

Primary Production Land Tax Exemption – The Greater Melbourne Boundary

An exemption from land tax is available for primary production land. The exemption criteria depend on whether land is inside or outside the ‘greater Melbourne’ boundary.

The Amending Act updates the greater Melbourne boundary by aligning it with the urban growth boundary, which is clearly defined in the Planning and Environment Act 1987.

The new boundary will apply from the 2015 land tax year. Accordingly, some land located outside the former greater Melbourne boundary that was exempt from land tax will fall within the new boundary.

If that land is also in an urban zone, it may be subject to more stringent primary production exemption criteria from the 2015 land tax year. However, owners of any such land will not be adversely affected by this unless a trigger event has occurred on or after 7 May 2014 such as:

• a sale

• a subdivision, or

• an adjoining parcel of land is purchased, making the land subject to the new criteria.

If a trigger event does not occur and the land continues to meet the original exemption criteria, the land will continue to be exempt.

The SRO will contact affected landowners directly to explain the boundary change and the associated grandfathering arrangements.

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This amendment essentially exempts all englobo landholdings within the boundary from State Land Tax until subdivision at the owner’s pleasure.

The adjoining parcel trigger is easily sidestepped – it could be bought by a different entity – ABC Pty Ltd could buy next to 123 Pty Ltd, with identical beneficial owners.

Englobo landowners have every incentive to withhold land from use and drive up its price.  Victoria forgoes revenue, Melbourne forgoes development land and citizens forego a home.

Inexpensive land in a country endowed with so much space should be embraced as a national and strategic economic advantage.  Instead, the Victorian government has deliberately chosen to enrich broadacre landowners at the cost of urban dwellers.

State Land Tax is a small but insistent reminder to all landowners of the obligation to put it to its best and highest use.  The Napthine exemptions skew the land market to favor lazy rent-seeking behavior.  They are to be condemned for this economic foolishness.  Landowners don’t even need a cow to be exempted.