"Carr backflips on Land Tax"

Alex Mitchell, State Political Editor, Sydney Sun Herald, 27 February 2005

In a desperate plan to halt the land tax revolt, the Carr Government is planning to shift the controversial tax from the unimproved value of land to the improved property value.

The plan would protect mum and dad investors who have put their savings into a second property as a "nest egg" for the future.

But it would slug big investors who have multi-property portfolios valued at millions of dollars.

Treasurer Andrew Refshauge has asked the Office of State Revenue to "scope" a reconfiguration of the tax which has provoked a voter backlash since it came into force on January 1, threatening Labor MPs in marginal seats.

Land tax is paid on investment properties - principal places of residence are exempt - at their unimproved valuation assessed annually by NSW Valuer-General Philip Western.

Up to 500,000 property investors, big and small, have been hit by the land tax introduced in May last year by the former treasurer Michael Egan.

They were "double-whammied" by soaring valuations introduced by Mr Western, even though the property market was receding.

Under the proposed plan, small investors who own a rental unit or weekender with an improved valuation of up to $340,000 - the so-called aspirational voters - would be exempt.

And to pay for the rumoured scrapping of the vendor tax and to pick up the slack from falling stamp duty, Dr Refshauge will target land tax at the wealthy end of the property market where small fortunes are being made in real estate speculation.

Opposition Leader John Brogden yesterday welcomed the Ombudsman's inquiry into the methodology employed by Mr Western to inflict exorbitant new valuations of between 20 per cent and 60 per cent on householders across the state.

He also called for valuations to be taken out of the Valuer-General's hands and placed under the control of an independent valuation system.

"An investigation of the valuation system is long overdue," he said.

"The present figures sent to householders since January have clearly been plucked from thin air.

"The Government is trying to use land tax to fill the gaping hole in its budget. It has become a cash cow to milk the citizens of NSW."

Christine Castle, vice-president of the NSW Real Estate Institute, said the Government had to take notice of the wave of opposition to the land tax and stop the flight of investors to "tax- friendly" states.

She said the proposal to shift land tax from unimproved valuations to improved valuations sounded "warm and fuzzy" but it would not solve the basic problem of bringing people back to property investment in NSW.

"Many people have simply said 'it's too hard' and they are walking away from buying a second property," Ms Castle said. "NSW is becoming a dirty word as far as property investment is concerned."

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