Land tax bills - a nasty surprise for small investors

11 November 2004

The arrival of the annual land tax bill is always a nasty surprise for small investors which could discourage additional people from investing in the property market, the Real Estate Institute of South Australia Inc. (REISA) said today.

REISA President, Mr Robin Turner, said that the first round of land tax bills for the year had been posted to individuals over the past fortnight and many people have already expressed shock at the rises in their land tax liability.

“Once again there have been increases in land tax and this causes some people severe financial hardship,” Mr Turner said.

“Many people with more than one property are just 'mum and dad' investors buying a holiday home for the family to enjoy or a rental property as an investment and this annual bill really makes them consider whether or not the long-term benefits are there.”

Unlike other taxes such as capital gains tax, income tax or the GST, land tax raises a liability on an unrealised gain. The tax is owed on paper, with no associated cash flow and this causes financial hardship, particularly for self-funded retirees and small investors.

Land tax is a disincentive for investing in the property market and it is an issue that the State Government needs to consider.

With an ageing population, the State Government should be encouraging people to plan for their retirement by delivering policies that support self-funded retirees and small investors and this includes a fair property taxation system.

Currently in South Australia, land tax is applied to investment properties exceeding $50,000 in value and land tax bills are posted to individuals during November, December and January. All other states, except Tasmania, have substantially greater value limits for land tax exemption.

“REISA encourages the State Government to inquire into the long-term financial impact of land tax on investors with just one additional property, to assess whether land tax acts as a disincentive to investment,” Mr Turner said.

The State Government has made substantial windfalls on property taxes over the past few years and land tax collections have been a contributor to this windfall.

It's time for the Government to consider raising the land tax exemption limit and to consider concessions for self-funded retirees and small investors.