Calls for top land tax rate to be slashed ahead of crucial week in parliament

One of the state’s biggest landholders says slashing the top rate of land tax to 1.5 per cent would send a clear message that SA is “open for business”.

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One of the state’s biggest landholders has proposed slashing the top rate of land tax to the lowest level in the country in order to appease property owners angered by the State Government’s controversial aggregation plans.

In its submission to a public consultation on the Government’s reforms, Peregrine Corporation argues its proposed top rate of 1.5 per cent would send a clear message that SA is “open for business”.

It would become the lowest top land tax rate in the country, equal with Tasmania. The State Government is currently promising to cut the top rate to 2.4 per cent from July next year.

Peregrine’s proposal retains all other elements of the State Government’s land tax bill, including aggregation measures that prevent land owners from paying less land tax by splitting properties between multiple legal structures.

“The impact of what we propose will see some businesses pay more (ours included) but we believe that this is more palatable to the business community, provides the Government with a solution, and importantly opens the door for investment inflows into South Australia, rather than the other way around,” Peregrine says in its submission.

Backed by the Shahin family, Peregrine controls a portfolio of close to 250 properties across the state, including the OTR network of service stations, retail buildings along Rundle Mall and office towers in the Adelaide CBD.

Cutting the top land tax rate is the company’s favoured approach, while its submission also includes an alternative proposal to grandfather existing land tax arrangements.

Under a “two-tiered” system, existing ownership structures would be shielded from aggregation, and would receive the staged rate cuts originally set out in the June Budget.

Peregrine’s submission is one of 190 lodged in response to the Government’s land tax bill, which will be introduced into Parliament tomorrow.

UDIA SA chief executive Pat Gerace

In its submission, the Urban Development Institute (UDIA) argues land tax exemptions should apply for developers of greenfield sites, given they generate economic activity and ultimately pass on the costs to home buyers.

It claims developers often limit subdivision activity in the weeks leading up to June 30, for fear of creating more valuable allotments that would be subject to higher rates of land tax.

To avoid that from happening, the UDIA suggests undeveloped land held by developers should be exempt from land tax entirely, while subdivided allotments should be exempt for three years.

UDIA SA chief executive Pat Gerace said another alternative was to introduce a system similar to Queensland and WA, where discounts apply to subdivided allotments.

“Land tax charged on developers, who are employing people and paying for the roads and infrastructure required in new developments, will inevitably be passed onto buyers of the end product and we think that’s unfair,” he said.

“When you consider that new housing product is already subject to stamp duty and GST, and then you tax land as an input as well, it’s no surprise it impacts affordability.

“We have one of the slowest and toughest greenfield development markets in the country, and changes to our land tax regime should be focused on stimulating the market rather than putting a handbrake on buyer activity.”