Transcript – Mornings with Leon Byner, 5AA FM, Adelaide

We’ll there are renewed calls for a broad based land tax to replace stamp duty, now the only thing I ask is, be careful what you wish for. There’s an advocacy group called Prosper Australia and they are are strong supporters of replacing stamp duty with land tax but they have a warning for first home buyers attracted to some government’s proposals to opt in to land tax —-I want to know, where do we stand in SA. So let’s talk to the Director of Advocacy at Prosper Australia, Karl Fitzgerald. Karl, it’s good to talk to you. Where do we stand in SA?

Thanks, Leon. Well, in South Australia, there’s been quite a lot of debate, of course, under former Treasurer, Rob Lucas, with the Land Tax Aggregation Bill. That basically saw the Land Tax Act shredded to pieces, if you like. There were all sorts of handouts that went to property and not much that went to actually benefit affordable housing. The top land tax rate was reduced from 1.25 to 1% and in this year’s budget, the land tax thresholds – sounds horribly geeky – but it’s where the land tax actually starts. That was increased by 11%. So it basically means that less and less of South Australian’s affordable land that’s owned by investors, has to pay land tax. And we really think that’s a bad thing.

Yes. So what’s the thinking behind doing that?

Well, there’s belief that less taxes equals more affordability, but when you kick through the economic text books and study the theory and the modelling like I have, you understand that if you’ve got an ongoing cost with owning land, you pay less for it upfront, because you know that you’ve got this ongoing burden. And that’s what the New South Wales government is pushing, to move further in that direction. So in a way, we’re borrowing less from the banks, but we’re paying a little bit more to the government and by doing that we can get rid of damaging taxes like stamp duty.

Is it true the home sellers are the big winners out of this?

Well if you found that you didn’t need to save up $50,000-odd, which is about the average stamp duty cost in New South Wales, you’d probably be tempted to bid a little bit more when you’re going for the property. And we’ve been studying the ACT transition away from stamp duty to land tax, and we’ve found that investors who have their financial advisors, they’re a bit more financially literate, they get the tip that look you’ve got to pull back your bid upfront because you’re going to have this ongoing cost, whereas the first home buyers, really don’t have anyone they can listen to, giving that advice that they need to be careful because they’re going to have these ongoing costs.

We’ve been pushing state treasuries around the nation to do the hard yards in terms of educating people on this sort of tax geekery.

What’s the difference between land tax and stamp duty?

Well, land tax is based on the value of your land. So last year, South Australian land values went up $9.7 billion. And from that, property investors are the only ones who pay a land tax. So yes, there was a small percentage of that $9.7 billion repaid to the government, but stamp duty is paid by the – it’s sort of split between the home seller and the home buyer. It’s a wider tax that everyone pays, investors and home buyers…. and the thought to the move towards a land tax is that it will actually encourage the vacant property and the empty bedroom, all sorts of commercial vacancies would become a little bit more costly to just hold and wait for the capital gain, and the property owner would have to put that property on the market to rent or to perhaps even sell it, adding to supply and pushing prices down.

It sounds to me, people listening to what you’re saying, would say yeah bring it on.

Yeah, well that’s right. This is why economists like myself get incredibly passionate about it because we’ve got to future proof our system. You know, people can buy and sell real estate now from a mobile phone. It’s so easy and the whole housing game has been commodified and unfortunately the property lobby’s running circles around our democracy …..we barely get to put this discussion on the table before some sort of scaremongering comes through.

New South Wales – they’re taking baby steps forward with this – we were involved in probably five or six high-level treasury, stakeholder engagement meetings; we saw all the modelling, we were involved in that and we’ve seen the political process really walk that backwards to a minor version of what was proposed even a year ago. But at least it’s a step in the right direction.

Karl Fitzgerald from Prosper Australia, thank you, we’ll keep a real eye on this, because as we always know, any cost incurred by business is ultimately passed on and paid for by you and I, the consumer.