SA Government secures crucial support of independent MP John Darley to help get land tax reforms through parliament
The State Government has just struck a deal with an independent MP in exchange for his support for its controversial land tax reforms.
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Smaller property investors would get bigger land-tax cuts under a new State Government reform plan that’s won backing from a key MP but now risks isolating others who are essential to ensuring the plan becomes law.
In a further twist to the long-running political saga, independent MP John Darley has now won significant concessions from Treasurer Rob Lucas and plans to back the land-tax reform plan in a vote expected this week.
However, the Greens are now reconsidering their support as the plan enters its fourth draft since the State Budget and further blows out the bottom line.
The deal done between Mr Lucas and Mr Darley would still close a “loophole” that currently allows land tax minimisation by splitting ownership between legal structures.
However, sweeteners in the package now include:
A TRANSITION fund of $25 million to help investors, who currently split tax bills. It would last for three years and scale down in value over time.
LESS tax to be paid on property portfolios valued between $755,000 and $1.1 million. The rate in that bracket would drop from 1.65 per cent to 1.25 per cent to 2020-21, and then to 1.0 per cent in 2022-23.
LIFTING the point at which the highest rate of tax kicks in to portfolios of $2 million and over. They would pay 2.4 per cent from 2022-23.
CONCESSIONS for developers of affordable housing.
Other changes include special treatments for trusts and large property developments.
When announced in the June Budget, the plan was to raise $40 million a year for the bottom line. Mr Lucas said the latest reform package would now result in a $39 million cost to the Budget over three years.
However, he said the Government now had its best chance yet of ensuring a difficult reform passed through the Parliament and became law.
“If this amended package is approved by the Parliament, the Government will have achieved two key objectives it set for its comprehensive land tax reform,” Mr Lucas said.
“The Government has refused to compromise on its objective to massively slash the top land tax rate in SA.
“The amended package represents a fairer and more equitable system as it introduces changes to aggregation rules similar to most other states.”
Mr Lucas has long said that he needed a resolution on the package before Christmas and said he now wanted a vote this week as Parliament sits.
Mr Darley said negotiations with the Government had intensified since an interview with the The Advertiser a fortnight ago in which he threatened to vote down an earlier version of the land tax plan in a bid to end a “madness” that was stalling the economy.
“They said ‘What do you want? I said ‘Look, I’ve told you what I want, how about you doing some work and telling me what you’re prepared to give me?’,” Mr Darley said on Monday. “I think it’s a good package. We’ve had punishing land tax rates for 40 years.
“SA had to do something about it. I think this is a move in the right direction.”
Mr Darley said the final “deal” for his support was only landed on Monday morning.
To pass the plan, Mr Lucas needs the votes of Mr Darley and the Greens, who were early supporters of the reform.
Greens MP Mark Parnell last night said he would be forced to take a close look at the latest change. He will support debate to continue if a vote is called, while reserving options on detail and pushing for affordable housing support.
“We want to bring the debate back to whether this actually makes society fairer and does this improve access to housing?’” Mr Parnell said.
Opposition treasury spokesman Stephen Mullighan said Labor would continue to reject a package which included $80 million in higher taxes on some investors.
SA Best MP Frank Pangallo said Mr Darley’s “backflip” was an “absolute insult”. “He came, he saw, he promised and he completely and utterly capitulated,” Mr Pangallo said.
It’s a rocky road from cash grab to tax cut
Analysis – Daniel Wills
Treasurer Rob Lucas is inching ever closer to a kind of “win” on land tax, in a delicate game of parliamentary Jenga that could still end in collapse.
Most people are familiar with the kids’ game of wooden bricks, which pits players against each other in the race to build a proud tower, but each step upward inevitably weakens its very foundation.
In a scrambled deal done over the weekend, Mr Lucas has got independent MP John Darley’s support for land tax 4.0. In doing so, he now risks losing support of the Greens, which was earlier pledged for a now-forgotten draft. This radically altered new plan further hollows out expected tax revenue that Mr Lucas’ unlikely allies had hoped would be used to fund a bigger government and more social services.
Greens MP Mark Parnell is clear.
He will now take the time to consider detail of land tax 4.0, and vote on its merits.
If Mr Lucas can hold the Greens and Mr Darley, as well as his own colleagues, together in the same boat then he will end 2019 with a much-desired victory in the Parliament.
But he would be passing a final plan that is very different in form and focus from the one that was slipped into the Budget five very long months ago.
It is easy to forget, but that first version of land-tax reform was a straight-up cash grab.
With the Government facing a massive pay cut from declining GST returns, it needed to get cash through the door. And it said so, very openly and without apology. On Monday, Mr Lucas said he was excited to be in striking distance of delivering a massive tax cut. Apparently, if you suffer from amnesia, that’s what the Government wanted all along.
If the Government gets this through, that will be the price of reform. The hole in the Budget bucket, which Mr Lucas in June wanted to plug, will get bigger. And that means any celebration could be short-lived as a new process starts to work out what will have to be cut, or new revenue measures needed, to pay for this political “win”.