"Land tax fury has states in retreat"

Staff reporters, The Australian, 3 May 2005

VICTORIAN Treasurer John Brumby will set the tone of this year's budget season today by announcing sizeable cuts in land tax, and cash rebates for investors shocked by big assessments this year.

Across the country, state treasurers have been caught on the hop by the breadth of anger about this lucrative and fast-growing revenue source.

The nationwide property boom has turned bracket creep into a sprint, and the steeply graduated tax rates exacerbate the problem.

What is true for all states is doubly true in Sydney and Melbourne, where prices, and land tax revenue, are highest.

In a typical Melbourne example, Neil Curry, the Capt'n Snooze franchisee in outer-eastern Nunawading, has seen his land tax burden climb from $1500 to $71,000 in five years, a 47-fold increase.

A backlash by small businesses and pensioners whose investment properties are suddenly too expensive to keep has threatened to seriously hurt Labor governments in Victoria, NSW, South Australia and Queensland.

In Western Australia the protest is more muted but growing, with Lino Iacomella of the Real Estate Institute of Western Australia saying the tax required "major reform".

Mr Brumby has signalled big cuts, particularly in the rates covering small and medium-sized businesses, and in NSW, Premier Bob Carr has asked Treasurer Andrew Refshauge to apply "special focus" to the tax when he brings down his budget on May 24.

Queensland Treasurer Terry Mackenroth has also vowed to slash land tax on June 7.

South Australian Treasurer Kevin Foley started the ball rolling in February, when he agreed to $245million worth of cuts over four years for an estimated 120,000 people.

Whatever tax cuts Mr Brumby offers, he cannot make them retrospective. But he can, and will, follow South Australia's example and offer cash rebates to those hardest hit by their assessments since January1. Big cheques from South Australian Premier Mike Rann's Government to small businesses in the past two months have soothed the political unrest.

In Victoria, Mr Brumby had resisted changes because he delivered land tax relief of more than $1billion over five years in last year's budget. Even so, revenue from land tax rose from $378million in 1998-99 to $926million this year -- about 1/11th of total state government tax revenue.

NSW changed its system last year to remove the tax-free threshold: every investment property is now subject to land tax. The tax raised $1.4billion in revenue for the state Government this financial year, representing about 6.4 per cent in revenue.

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