George Inglis |
Wednesday, 3 February 2010 8:59 AM |
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I'll be upfront. Nobody likes paying tax. But when tax systems work efficiently and direct government funding towards projects of economic, social and environmental benefit, the community as a whole grows.
Unfortunately, despite recent announcements on land tax, our current tax system still isn't right. It is riddled with inefficiencies, it's not terribly fair and in many ways it acts as a disincentive to increased investment.
The Treasurer's recently released Mid-Year Budget Review that showed the South Australian economy has been ticking along despite the global uncertainty is fantastic news. Even better, the announcement that, if re-elected, the Government will lift the base land tax threshold from $100,000 to $300,000 is a great start to property tax reform. This initiative was then mirrored by the Redmond-Liberal Opposition who had already committed to increasing the base threshold for land tax from $110,000 to $250,000.
Now, no matter what the result, small investors providing in South Australia, those providing places for people to live will benefit.
This is good news for mum and dad investors, but on a $300,000 threshold there's certainly no South Australian business getting out from under the land tax anvil, no to say anything about the $5 million or so invested in property on our behalf by our superannuation funds.
That the thresholds will be indexed in the future is good news as it will alleviate the voracious and fast-growing nature of bracket creep that we have all come to fear.
But again, with our maximum threshold at $1 million and at the highest rate in the nation at 3.7% The biggest issue is that it's still unfair.
Property tax receipts in South Australia account for over 40 per cent of own state revenue, meaning the sector pays an inordinate proportion of the state's tax burden. Further, investors with more than one property get caught by "aggregation". This is the practice under which the Government taxes the combined value of the properties, which invariably pushes all investors into higher taxes brackets.
Or to other states that offer better returns on their investments.
While the common refrain is that only the rich pay land tax, this is simply not true. When mum and dad investors pay land tax, it pushes up the cost of rents; when a commercial investor pays it, it pushes up the cost of rents, when a developer pays it, it pushes up the cost of new homes. At the end of the day, this is a tax that flows through into every wallet in the state.
The South Australian system is so out of whack that we are only bettered by Tasmania. Tasmania is due for a State Election on the same day as South Australia and their State Government has already committed to slashing land tax by introducing a flat rate of 1.5% at a threshold of $350,000 and the Opposition has just announced, that if elected, the scheduled abolition of land tax over ten years.
The Property Council is saying enough is enough. We understand the pressure on Government coffers from the GFC and other portfolios such as health, transport and so on. We understand the need to provide a range of services to the community. But it is now time to stop the rot and provide genuine relief to those that invest in our future.
It is high time for more significant reform.
George Inglis |
Wednesday, 3 February 2010 8:59 AM |
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