A proposal for reform
Growing community outrage and political bickering over the manner of assessing and collecting
land tax in NSW has made it imperative to reform the current system.
At present, only 85,000 out of 2,500,000 properties are saddled with paying $9,000 million
dollars in land tax collected annually. This is unfair and inequitable.
In 1993, the NSW Government Pricing Tribunal into the assessment and collection of water
charges stated unequivocally that "cross subsidies should be eliminated as rapidly as possible."
The same principle should be applied equally to all property owners in the assessment and
collection of land tax.
A Submission to the 1998 Inquiry into Land Tax Changes was prepared by the former principal
of DLS, Mr David Singer and by Mr Sam Spitzer a property investor who was closely involved with
the 1993 Government Pricing Tribunal into Water Charges.
This Submission has already been adopted and supported by the Property Owners Association
of New South Wales and the Eastern Suburbs Land Tax Action Group.
It shows that land tax can be fairly distributed among all property owners if an amount of
land tax is levied equal to one third of the council rates currently being paid on each property.
This means that a property owner paying $900 in council rates will pay $300 in land tax and
a property owner paying $3,000 in council rates will pay $1,000 in land tax.
All exemptions and rebates currently allowed in relation to council rates would equally apply
to payment of land tax.
Our Submission calls for the abolition of the Land Tax Office, for local councils to collect
the land tax on behalf of the NSW government and for councils to receive a fee for this service.
The Submission as presented to the Inquiry is set out in the following section. It was the
only Submission made to the Inquiry that recognised the need to preserve the revenue currently
being raised by Government from land tax whilst at the same time presenting a solution to the
unfair manner in which land tax is currently being collected.
It is no secret that the current system is imposing great financial and emotional stress
on a large number of people in the community including pensioners, self-funded retirees and
tenants of both commercial and residential properties.
It is time reform of land tax occurred. We welcome your interest and trust that you will
fully support our initiative by contacting us or your local council mayor, the NSW State Premier,
Treasurer or any Minister, your NSW Government member, or the various interest groups listed
below.
The problem with the current scheme
The present land tax scheme in NSW burdens a small number of property owners, to raise funds
for its NSW Government to assist in a range of public programs.
The problem with the current system is that is unfair and inequitable - it taxes a small number
of property owners irrespective of their ability to pay it.
No-one doubts that the NSW Government requires funding to assist it with the many worthwhile
programs it operates for the welfare, good government and the benefit of the people of NSW.
The solution therefore is not to abolish the land tax regime altogether, because this would
lead to the elimination of an important source of revenue for the Government and jeopardise
the many programs in place.
The solution lies in finding a scheme that is more equitable - that, is, a scheme which spreads
the land tax burden among all NSW property owners in a fair and equitable manner so as to retain
the revenue base currently being raised by the NSW Government.
The proposed solution
Our Submission put to the Inquiry contained the following features.
- It will eliminate the cross subsidy currently enjoyed by 2,400,000 properties which are
not assessed for land tax whilst only 70,000 property owners are assessed for land tax.
- It will assess all properties in NSW with land tax, in an amount equal to one third of the
council rates currently being paid on each property.
- Presently, the total annual council rate revenue is $2.4 billion. Total annual NSW land
tax collected is $800 million. Under this Proposal, the NSW Government would collect the same
amount of land tax. The difference however with this Proposal is that the land tax obligation
would be spread equitably over all properties and all property owners in NSW rather than a small
group of them.
- All exemptions and concessions relating to payment of council rates would apply to the payment
of land tax.
- Abolish the NSW Land Tax Office. Land tax would instead be collected by local councils at
the same time as collection of council rates. Councils would receive an agreed fee for collecting
and accounting for land tax to the NSW Government.
Advantages
The Submission would:
- Eliminate cross subsidisation by one group of property owners in favour of another group.
- Bring about substantial savings for tenants of commercial and residential properties who
in many cases bear the brunt of the land tax levied on properties leased by them.
- Lead to greatly reduced payments for existing taxpayers.
- Lead to the removal of financial and emotional stress caused to taxpayers who are bearing
the burden of current land tax collections. There have been countless cases of financial hardship
and distress caused by the existing land tax scheme on residential and commercial properties.
- Result in the raising of additional revenue for local councils by way of collection fee
- with very little outlay by the Councils for the administration of the scheme and collection
process envisaged by the Proposal. Council would merely add the land tax component to their
existing council rates notices and collect the tax in much the same way as it collects rates
from its rate payers.
- Lead to consequential cost savings to government. Under the Proposal, the calculation, assessment
and collection would be simpler than the current system.
- Remove distortions in rentals paid by tenants. As all existing rebates and exemptions relating
to payment of rates would apply to payment of land tax, the inequities and cases of hardship
caused under the existing regime would be eliminated.
- Eliminate the need to make separate enquiry from the NSW Land Tax Office when purchasing
a property - the land tax payments relating to a particular property would be ascertainable
from a council rates notice.
- Reduce objections to the VG's valuations and reduce subsequent re-valuations and consequent
appeals to the Land and Environment Court. This would free up the VG's staff and reduce court
delays.
- Eliminate the need to lodge land tax returns - given the tax would be paid by the property
owner as and when rates notices were issued by the local council.
- Reduce general public ignorance as to when land tax liability arises - as the tax liability
would be stated in the local council rates notice.
- Remove the land tax debate as a political issue.
Disadvantages
- There may be voter dissatisfaction by those property owners who do not currently pay land
tax. However in the majority of cases the land tax per annum would not exceed $350.
- There would be losses of jobs within the land tax office and possibly the VG's Department.
Jobs within the local councils may however increase as a result of the Submission.
- The Submission could lead to the loss of Government control over the collection process
(as it would be taken over by the local councils). It would however be relatively easy to put
in place a system of controls to ensure the remittance and accounting of monies collected by
the local councils was carried out in accordance with statutory requirements.
Conclusions
At the fundamental level, the Submission proposal is based on the principle that one group
of property owners should not subsidise all other property owners.
It also recognises that the NSW Government requires a certain level of revenue to properly
administer its many worthwhile programs throughout NSW. From roads to hospitals to education
programs, the NSW Government is committed to countless programs ensuring the welfare and good
government of its constituents.
The NSW population continues to grow. Against this, the Federal Government has reduced its direct
State funding and indirect funding (through budget cuts) over the past decade. As this occurs,
the NSW Government's responsibility to its constituents increases.
The calling for the wholesale abolition of the land tax scheme altogether does not take this
into account.
Land tax is a tax on land. The Submission contends that it should therefore apply to all land
in NSW, not just a small proportion of it.
Tying the amount of land tax to local council rates being paid in respect of that land distributes
the burden of payment equitably among all property owners, whilst ensuring that government continues
to collect the funds it currently raises from land tax.
For further information contact:
Simon Singer
Phone 9212 1099
Email ssinger@dls-lawyers.com
David Singer
Phone 9212 1099
Email dsinger@dls-lawyers.com
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