Property revaluations could trigger tax tidal wave
A landmark report reveals that the State Government’s controversial property revaluation initiative could trigger a tax tidal wave, leading to millions in extra taxation revenue.
The Property Council of Australia commissioned Deloitte Access Economics to explore the implications of property increases, and the corresponding impact on land tax.
“This exercise has the potential to bankrupt owners of commercial property and significantly increase land tax bills for ‘mum and dad’ landlords,” said SA Executive Director Mr Gannon.
“Under a scenario where property values increase by 10 per cent, the State Government could gouge $75 million in extra land tax revenue each year, the bulk of which would be delivered by the commercial sector.
“This scenario risks the viability of the entire property industry, let alone a situation where valuations increase by 20, 30 or even 40 per cent.
“Given South Australia’s lower incidence of institutional investment, it is possible that significant increases could render family owned or small private property businesses bankrupt.
“Taxes and costs have to be passed on, which means tenants and renters could be slugged.
“In the wake of this report, it is now clear that we need to carefully and prudently consider the economic ramifications of the Valuer-General’s revaluation initiative.
“This will require immediate adjustment to the state’s land tax rates to counter the anticipated upswing in tax revenue, otherwise heightening the risk of bankruptcies, driving up costs for tenants and waving goodbye to investment funds.”
To achieve a revenue neutral scenario following a 10 per cent increase to site values, Mr Gannon said the following reforms would need to occur:
- Rates in the top marginal tax bracket would need to fall from 3.7 to 3.05 per cent
- Rates in the bracket below would fall from 2.4 to 2.15 per cent
- Rates in the next bracket down would fall from 1.65 to 1.42 per cent
- Rates in the lowest bracket would fall from 0.5 to 0.43 per cent
Media contact: Daniel Gannon | E firstname.lastname@example.org