Treasurer Rob Lucas wants to slash land tax rate to 2.4 per cent but refuses to back down on controversial loophole ban
The SA Government has unveiled drastic changes in its final land tax package — but still insists it will close a tax minimisation loophole despite a fierce backlash from the Liberal base.
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Property investors would receive big land tax cuts under a “bold reform package” which Premier Steven Marshall hopes will end a long and increasingly bitter battle with his pro-business base.
The Advertiser can reveal that the top rate of land tax in SA would fall from the current 3.7 per cent, by far the highest in Australia, to 2.4 per cent under a plan approved by Cabinet.
Scrollable table of land tax changes: Click here if not displaying properly
The Government says that will put SA’s rate in line with the average of mainland states.
It comes as part of a wider rejig to SA’s “uncompetitive” land tax regime, which also eliminates the charge for more than 9000 investors with properties valued at $450,000 or less.
The new top rate will kick in for land portfolios valued at $1.1 million, down from $1.3 million, and those investors will reap some of the biggest gains from the land tax overhaul.
Self-managed superannuation funds will remain separate from other personally held assets and exempt from greater land tax aggregation.
But the Government is sticking with contentious plans to close a tax minimisation “loophole”, where ownership is split between legal structures, a change industry groups and business leaders have warned will unfairly harm investors who have followed the law of the land.
The package would come into force from July 1 next year if it gains support in Parliament.
Treasurer Rob Lucas said the long-awaited package, which was discussed by the Liberal partyroom on Monday evening, would result in an “overwhelming” 92 per cent of personal investors paying less. He said 75 per cent of company groups would also pay less.
Mr Lucas said the final package was a “historic” change that would put money in the pockets of mum and dad investors while increasing SA’s appeal to business.
“The vast majority of mum and dad investors ... will be financially better off,” he said.
“We have said all along that we believe 3.7 per cent was uncompetitive. People were investing in property in Melbourne and Sydney and Brisbane compared to Adelaide.
“We want to be open for business. This is all about a narrative of lowering costs.”
A previously announced surcharge for trusts that don’t disclose their beneficiaries remains.
Mr Lucas conceded that his new package would not quieten all critics, which have included Liberal MPs and supporters as well as the influential Property Council lobby group.
“There will still be people who will be impacted,” he said. “(But) no one can defend a situation where you can have three or four million dollars in property and not pay land tax.”
Despite a torrid two months where the land tax brawl overwhelmed the Government’s public agenda, Mr Lucas insisted “in retrospect I can’t say it could have been handled differently”.
“You would always like to have more detail,” he said.
“My sixth sense always was that this was extraordinarily complicated and we just have to take the inevitable criticism that would open up where you are unable to answer all the questions for a period of two or three months.
“It was well worth the exercise because we now have a bold and comprehensive reform.”
The change to stop property splitting was first mooted in the June State Budget, and expected to raise $40 million per year. The Government’s revised estimates projected almost three times that to be recouped, at $118 million per year.
However, the total amount of land tax paid and collected will fall overall by $70 million over three years, as the rates and thresholds change.
Mr Lucas said: “We accept that our initial estimates were inaccurate”.
The plan will be released for a month of public consultation, before introduction to Parliament. It would need support from Labor or the crossbench to come into force.
The Opposition has not taken a firm position, as it awaited release of a final tax package.
SA Best and independent MP John Darley have been strong critics of the plans to stop property splitting, and can form a blocking coalition in the Upper House with Labor support.
Many of Mr Marshall’s internal critics, and key Lower House crossbenchers, have indicated they are open to accepting an end to property splitting if total tax charges come down.
State Parliament returns on Tuesday after a five-week winter break.
Property council rejects plan
A leading industry group has rejected the State Government’s “compromise” land tax plan, as the Opposition demands the release of all modelling to show who’ll pay more under the wholesale reform.
Property Council of Australia SA executive director Daniel Gannon told The Advertiser the plan still punished people who had followed the law and reduced tax bills by splitting land ownership.
“If aggregation is still part of the plan, it’s not a plan that we support because it’s incomplete and underdone,” he said. “The Government’s appetite for a reduced top rate is welcomed.”
He also raised concerns about the wild inaccuracy of Budget modelling on the amount to be raised from the aggregation changes, questioning how any investor could have confidence ahead of a separate Auditor-General’s property revaluation.
It was a concern shared by Opposition treasury spokesman Stephen Mullighan, who also said Premier Steven Marshall’s handling of the changes had been “a shambles” and Parliament “must now be provided the full details of these changes and the impacts on land owners”.
“Given the Government was almost 200 per cent out in its estimates on the impacts of aggregation, South Australians can’t have much confidence that what they’re now being told,” he said.
The Opposition is backing a Parliamentary inquiry to “get to the bottom of the impacts”.