Companies to bear the brunt of new land tax changes, paying $63m more per year
“Mum and dad” investors have been central to a political barney swirling over land tax. Now, it can be revealed that companies actually bear the biggest burden of cost rises from the new plan.
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Companies will pay the vast bulk of increased land taxes under the new State Government reform plan, and shoulder a burden that’s almost six times that of individual investors.
Premier Steven Marshall last week released a new land tax package which includes both cutting the rate that’s charged and closing a “loophole” that lets investors reduce their bills or avoid paying completely by splitting ownership between complex legal structures.
The Government has said the large majority of people and businesses will be better off under its new plan, which delivers an overall cut in tax collections of $70 million over three years.
However, The Advertiser can also now reveal the breakdown of who will pay more tax as Mr Marshall’s plan forces both businesses and individual investors to group their land portfolios.
Individual property investors, or natural persons, will deliver $11 million in new revenue each year to the Government as splitting is banned.
Companies will pay $63 million in new taxes.
New changes in the taxes on trusts are also set to yield the Government $17 million.
But, as some taxes go up for some investors who will be made to group their properties for the first time, the Government also plans a larger $105 million tax handback to others.
That includes a deep cut in the land tax rate paid on portfolios of $1.1 million or more, from 3.7 per cent to 2.4 per cent, and eliminating all charges for properties valued under $450,000.
The figures are contained in a PwC consultancy report commissioned by the Government, which will be released publicly on Monday and underpinned modelling in its final land tax package.
Treasurer Rob Lucas said releasing the modelling would aid understanding of the full package, which left 92 per cent of individual investors and 75 per cent of companies better off.
The package is out for public consultation, and due to be introduced to Parliament next month to ensure a vote before Christmas and implementation of changes from July 1 next year.
Labor is yet to declare its hand, and will hold public forums to help it decide.
Key SA Best Upper House MP Frank Pangallo said serious consideration must be given to grandfathering the changes, so that no one was left worse off under the controversial reform.
That would mean investors who currently split land ownerships could continue to do so, but the option would no longer be available to purchases made after the new package takes effect.
“I’m going to stick to my guns,” Mr Pangallo said on Sunday.
“There will be at least eight per cent (of individual investors) that are going to be paying far more.
“That’s not fair.
“Grandfathering is probably the way you want to go.
“People who have done the right thing up until now, and followed the regulations, shouldn’t be punished for what they did.”
Mr Pangallo is demanding a parliamentary inquiry, which the Government will not support.
Mr Lucas said he would offer briefings to political opponents and industry about the package that has been announced in a bid to secure support, but grandfathering was not an option.
“It would be an extraordinarily complicated piece of legislation,” Mr Lucas said.
“If you have got a company with a shareholding or director change, or a family trust where a wife dies and is replaced by a son, how does that affect the new and old systems?
“There are 100 questions that they (Labor and the crossbench) would have to draft.
“But in the end the big argument is that essentially you are just locking in what has been an unfair and inequitable system forever and a day, and therefore not generating the revenue that is needed to be able to make the other changes.
“It’s just another way of defeating the bill.”
Independent MP John Darley, who could combine with SA Best to give Labor the numbers needed to defeat the package, told the Upper House last week: “I am very much opposed to the Government’s proposed changes to land tax which were announced as part of the Budget”.
Scrollable table of land tax changes: Click here if not displaying properly