New rewrite of land tax rushed though Cabinet and Liberal party room in State Government bid to win industry support
Treasurer Rob Lucas has revealed surprise changes to his land tax package, in a bid to finally get industry opponents on his side.
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Treasurer Rob Lucas has secured an 11th-hour land tax peace deal with industry, as a third policy rewrite since the State Budget was rushed through the Liberal party room on Monday night.
The surprise changes were pushed through Cabinet and then the party room at pace on Monday, just as the Opposition was readying to make a decision on a now-outdated version of the plan that was expected to be the focus of debate in parliament this week.
It is understood several Liberal MPs flagged grave ongoing concerns with the Government’s land tax policy at the weekend, including warnings that some would reserve their rights to cross the floor over it. Liberal sources have told The Advertiser it is currently unlikely that any MPs will ultimately break away from the Government.
The new land tax deal delivers extra relief to investors with portfolios valued over $1.1 million, but keeps controversial aggregation changes that had enraged developers.
Property Council of Australia SA executive director Daniel Gannon, the loudest critic of earlier versions of the reform, said his “fight for a fair go” had secured a “compromise”.
In a dramatic shift, Mr Gannon is now urging parliament to back the updated land tax package, which Mr Lucas intends to force to a vote before MPs break for Christmas.
It’s expected Labor will make its position on the latest policy clear on Tuesday morning.
Opposition leader Peter Malinauskas is expected to speak on the issue at 10.30am at a caucus meeting, currently underway.
Labor has the power to ensure the passage of the government’s reforms but if it rejects the plan, upper house crossbenchers will become critical in the process.
Advance SA’s John Darley has indicated he’ll oppose the reforms, which would make a keptical SA Best party the government’s last hope of getting the reforms through.
The Government’s latest plan seeks to introduce a new 2.0 per cent tax rate, which would apply to land portfolios valued between $1.1 million and $1.35 million from July 1 next year. That bracket would be expanded to include investments of up to $1.6 million, in 2022.
Mr Lucas will also lock the State Government into a comprehensive land tax review in 2023, regardless of who wins the next election, focused on having a nationally competitive regime.
The Government says the update delivers an extra $20 million in tax cuts over three years, in addition to $70 million in savings committed under earlier versions of the policy.
But it still needs support from Labor or sceptical crossbenchers to become law.
Mr Lucas said the reform had been difficult but was too important to walk away from.
“I think this is a once-in-a-generation attempt at genuine land tax reform,” he said. “If this doesn’t go through, I can’t see any government ... being willing to take it on.
“We welcome the Property Council’s support. We hope Labor and the crossbenchers will reconsider what is an endeavour by the Government to put a fair package out there.
“We think it is in the state’s best interests. If this (change) is something which can assist the reform to get through, then it’s certainly worth the additional effort.” Mr Lucas said detail of the compromise had only been agreed “in recent times”.
Mr Gannon said land tax changes announced in the Budget “blindsided investors and undermined confidence”, while putting SA’s “investment environment at significant risk”. “On balance, we now believe that property owners face a fairer situation,” Mr Gannon said.
“While SA’s proposed land tax rates are still less competitive than other jurisdictions, the downward trajectory is an important one.
It is now our belief that this Bill is a workable compromise and as such should receive support and proceed through the parliament.”
Despite the Property Council backing, other industry groups retain significant opposition to even the latest government plan.
Master Builders SA chief executive Ian Markos said he wants a land tax regime that encourages people to invest in South Australia.
“We welcome the increase in the maximum threshold at which the top tax rate of 2.4% will apply.
“We also welcome an independent review on the impact of the reforms,” he said on Tuesday morning.
“However, more work needs to be done on the bracket for which the new tax rate of 2.0% will apply. Master Builders SA would like to see an increase in the cap of $1.35 million.
“Master Builders SA reaffirms our strong opposition to land tax aggregation. Combined with the statewide revaluation aggregation is likely to lead to significant land tax bill increases for many of our members.
“We are concerned about the impact this will have on housing affordability and therefore job opportunities for tradies, apprentices and suppliers.
“Master Builders SA remains ready to work with all sides of politics to ensure South Australia has the most competitive land tax regime in the nation - a regime that drives jobs and economic growth.”
Under a September rewrite of the policy, a tax rate of 2.4 per cent was to kick in on all portfolios valued at $1.1 million and over, down from the current highest rate of 3.7 per cent. That 2.4 per cent rate will still apply as the top rate of land tax payable in SA and be levied on portfolios valued above $1.35 million in 2020, and then over $1.60 million from 2022.
Land is taxed in a similar way to income, with progressively higher rates based on total value.
Labor’s shadow cabinet met on Monday to consider its position on the Government’s previously-announced land tax plan, as Mr Lucas demanded a do-or-die vote by Christmas.
He has said that was necessary to allow bureaucrats time to come up with systems needed to levy the major tax changes, and end confusion for investors.
Anticipating the push for a new policy change, Opposition treasury spokesman Stephen Mullighan said the Government was “in chaos”.
“It casts real clouds over Steven Marshall’s leadership and stewardship of these land tax changes, and whether he could get them through his own party room,” he said.
When the State Budget was handed down in June, the Government announced plans to close the aggregation “loophole” and raise $40 million per year.
After an industry and internal party backlash, Mr Lucas in September committed to a deeper cut in SA’s top rate of land tax.
Urban Development Institute of Australia SA chief executive Pat Gerace said the package “is only a marginal improvement at the top end, which will not address some of the fundamentals that we have raised”.
“The bill needs much more work,” he said. “It still doesn’t send the message to the property sector that we are the place to invest.”
This latest rewrite comes a fortnight after Premier Steven Marshall introduced and spruiked a now-outdated land tax plan to parliament, which he will now have to amend.
Last year, parliament passed separate reforms that will lift the land tax-free threshold and result in no bills for people with properties or portfolios valued under $450,000.
That move alone is estimated to deliver relief for about 9000 investors.