South Australia is reforming Land Tax laws so holders are assessed on their aggregate land holdings by looking through corporate structures some have created to minimise their liabilities.
The SA reforms mirror and are based on existing laws in Victoria and NSW. This tidies up the 2008 Section 13A provisions recently retested in the SA Supreme Court.
SA expects to raise about $40m a year; the Property Council of Australia estimates the change will raise ‘at least double’ that – which gives an idea of the scale of minimisation going on. Either way, SA will improve the integrity of its land tax base and level the playing field for all.
Adelaide’s InDaily quotes local land holder Ben Fitzsimons saying on Facebook his land tax bill was “set to increase by around $200,000”. If Fitzsimons would otherwise be paying the top rate of 3.7%, his use of trusts or similar corporate structures has shielded $5.4m in land from tax – the lost government revenues had to be made up from higher tax rates, other taxes or by providing lesser services.
“I’ve just opened a council rate notice that has seen my rates increase 57 per cent in one year – that means my cost to tenants will increase by 57 per cent,” Fitzsimons also said.
A land parcel Fitzsimons holds has gone up in value by 57 per cent. It is reasonable that he share a portion of the value uplift he enjoys with the state that provides the infrastructure and services which give this land its value. And, no, he won’t be passing on this holder cost to his tenants. Rents are a factor of wages or business income generated, not of holder costs. This impost falls squarely on the land holder. The economics behind this practical reality are well understood and beyond debate. See: Australia’s Future Tax System.
The SA Marshall Liberal government is also lowering the top rate of land tax from 3.7% by annual decreases of 0.1 per cent a year to 2.9 per cent in 2027. Sure, why not. Australian land prices are so grossly inflated relative to the economic rents they command that in many cases the top rate would capture more than the land rent.
Land Tax is different to all other taxes: it is paid by those who choose to hold land and is entirely voluntary – anyone who dislikes this tax can simply rent.