Treasurer Rob Lucas flags ‘significant reduction’ in SA land tax rate, as SA Government readies release of rejigged plan
New figures show thousands of investors are paying higher tax because they have not divided the ownership arrangements – Treasurer Rob Lucas says it proves the existing system is unfair.
SA News
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Thousands of “mum and dad” property investors have been told to expect a “significant reduction” in their bills, as the State Government prepares for the imminent release of its rejigged land-tax plan.
Cabinet and the Liberal partyroom meet on Monday, ahead of Parliament’s return on Tuesday.
The five-week winter break was dominated by public debate and internal Government division over the impact of a shock $40 million State Budget plan.
The proposed reform would stop people from reducing tax on property portfolios by dividing ownership into sophisticated legal vehicles.
Like income, the tax rate paid on land investments scales up with the value. Splitting properties lets investors pay less, or even no tax, by arranging a portfolio separately.
The Advertiser can reveal that detailed Government modelling has now identified that 22,300 investors pay higher tax because they have multiple properties but have not split the ownership arrangements.
The analysis found that 16,300 of those are real people, rather than companies or other legal entities.
Treasurer Rob Lucas is seizing on that figure as evidence of an “intolerable and unfair” system that has left many “mum and dad” investors paying higher tax because they have not used trusts or companies to minimise their bills.
He has also given a strong indication that they will soon receive a large drop in tax bills as SA’s top marginal rate of 3.7 per cent, by far the highest in the nation, is slashed.
“They have been shouldering the burden. They are currently paying 3.7 per cent, and it’ll come down,” Mr Lucas said.
“The vast bulk of them would benefit from the proposed reforms and changes.”
The Government has previously stated it wants to reduce the rate to 2.9 per cent over several years, but there is now growing expectation that the tax-cut plan will start sooner and go much further.
It is also standing by plans to increase the value at which land tax needs to be paid, to only properties worth more than $450,000, a move the Government says will mean 8000 investors no longer face the annual slug at all.
It will not drop plans to close the “loophole” that allows property and land-tax splitting. Several other states have already imposed that reform. Mr Lucas said there would still be some people under the final reform plan who pay more, including those who have split properties to reduce tax bills.
He would not reveal how many investors were in that category.
“Inevitably, there will be some who end up having to either pay some land tax, or more land tax than under the current arrangements,” Mr Lucas said.
“No one who is opposing this had yet given any defence as to why someone who might have $2,500,000 in property might not pay a single dollar.”