"A sneaky way to maintain revenue"

Editorial, NSW Daily Telegraph, 14 February 2005

OFFICIAL valuation reports provide more evidence about the insidious nature of the Carr Government's new land tax system.

The Government's own valuers knew the market had either fallen or stalled since October 2003 and that their recommendations to increase land valuations for the purposes of the 2005 land tax mail-out would be "contentious".

Small-time property investors are now paying the price for property price increases which happened about 18 months ago.

These land tax changes are most bizarre.

By removing the land-tax-free threshold of $317,000, the new system punishes "mum and dad" investors who previously never paid land tax.

The threshold system worked.

More often than not it meant professional landlords - people who had several major properties including entire unit blocks - bore the biggest land tax burden.

The threshold floated up or down each year, depending on the property market.

Now any person who's trying to fund a retirement from property investment, or who's bought a house for their children, is being stung.

These people are not silvertails - in fact you'd ordinarily expect them to be ALP voters.

And yet owners of large commercial office or industrial buildings have seen their land tax bill fall, because the highest rate has fallen from 1.7 per cent to 1.4 per cent.

Professional landlords can keep accumulating property, knowing they are paying a lower rate than previously.

This hardly works towards the Government's aim of dampening property speculation, to help first home buyers.

Some media reports suggest the Government may be considering "capping" land tax revenue, in reaction to the furore about the new system.

This may not necessarily be the solution.

The property market is now falling.

It seems almost certain that most people's land tax bills will fall in 2006, because the market is weaker and official government valuations are sure to drop.

The Government may be tempted to tweak the system again this year to ensure that it receives the same amount of revenue next year, as it will this year.

Further Information

For further information contact:

• Simon Singer
• David Singer