"Back tax on land catches investors"

Jonathan Chancellor and Bonnie Malkin, Sydney Morning Herald, 29 March 2005

Thousands of property investors hit with land tax bills for the first time are also receiving hefty bills for back tax - for which they did not know they were liable.

The backdated bills, which have an interest penalty rate of 13.5 per cent, are set to bring the State Government $47.5 million in revenue this financial year.

The trigger has been a discrepancy in property values advised by local councils and the Office of State Revenue.

Investors who used council rates notices to work out how much their property was worth often found the actual value to be higher because the council valuations were not as up to date as those done annually by the Office of State Revenue.

The problem has been compounded by the fact that land tax is self-reporting, which means property owners who think they may be liable to pay the tax must register with the Office of State Revenue to be assessed.

Only when a property owner registers with the office does it tell them how much their property is worth and how much they owe. And it is because those caught by the new threshold have now registered that the office has been able to issue bills for back tax.

The president of the NSW Real Estate Institute of Australia, Rowan Kelly, said the system was confusing and had left many property owners in the dark. "The idea of having to nominate yourself is a little bit strange; it's not really the Australian way of doing things."

The issue arose after the State Government widened the land tax net in last year's mini budget when it indicated about 250,000 people would pay the tax from the 2005 financial year, regardless of their land value.

One hundred and ten thousand people previously paid land tax, when the threshold was $317,000. However, state Housing Department figures suggest at least 300,796 extra properties are now liable for the tax.

The number of small investors paying tax in nine municipalities - Blacktown, Marrickville, Sydney, Fairfield, Camden, Campbell-town, Penrith, the Hawkesbury and Wollondilly - will increase more than fourfold.

Documents from the Valuer- General's office suggest more than 800,000 properties could be liable for the tax once holiday homes are included in the total.

The Opposition Leader, John Brogden, said the system was seriously flawed, slugging small property owners with huge bills they did not know they owed.

His spokesman, Lance Northey, said: "Land tax is one of those self-reporting taxes, so it's difficult for people to use."

Labor MPs have also put pressure on the Treasurer, Andrew Refshauge, to solve the problem. The MP for Miranda, Barry Collier, said: "There are people not knowing they are liable and getting hit. It's a very real problem that has emerged.

"One gentleman thought he was exempt from the tax and was then hit with a bill for the current year and three previous years plus interest on top of that.

"He genuinely thought on the basis of his council valuation that he wasn't liable, and suddenly he was hit with four years' tax."

Dr Refshauge admitted that many people had been caught off-guard by the discrepancy, and he promised to review the problem before the budget in June.

All new land tax payers must lodge their ownership registrations with the Office of State Revenue by Thursday.

Further Information

For further information contact:

• Simon Singer
• David Singer