Property owners get land tax cash back

8 February 2005

Land tax rebate cheques worth $20.6 million will be sent to 130,000 landowners over the next few months.

In a move aimed at shoring up support in key marginal seats, the State Government has unveiled a $245 million, four-year land tax package eliminating land tax bills for 44,000 landowners.

As part of the package, home-based businesses such as bed and breakfast operators will be able to claim relief from land tax and it will be eliminated for caravan and residential parks.

New tax rates, which will result in the number of tax scales being reduced from more than eight to only five, will be effective from the beginning of this year.

There will be no land tax paid on properties worth up to $100,000 and the rate on properties between $100,000 and $350,000 will be 0.30 per cent.

Savings for taxpayers will range from $87.50 to $2850.

The Government has been under intense pressure for more than 12 months over the land tax issue, with some people saying that they had been forced to close businesses or sell properties to pay their bills.

About 120,000 people currently pay land tax.

Anyone who owns more than one home is liable for the tax. But it is not payable on the principal place of residence.

Real Estate Institute of South Australia president Robin Turner said the changes would bring "fairness back into the system".

He said the changes would help sustain the SA property market and particularly help small investors and families with a holiday home.

"Land tax is a tax levied on an unrealised gain with no associated income, so for many people this annual tax was starting to make them question the value of their investment," he said.

"Also, families with a holiday shack were really feeling the financial burden of land tax, so it's particularly encouraging to see that properties valued at less than $100,000 in value will now be exempt. It's also great to see that these new rates of taxation are applicable for this financial year and people will receive a rebate on tax already paid. The new land tax structure represents meaningful reductions for all property owners, not just token measures and this is something that the institute has been lobbying for over many years."

Mr Turner said the changes would have flow-on effects in the wider community. "For example, there won't be the same pressure for property owners to increase rents," he said. "The effects will flow on to consumer goods, so everyone gets a little win out of this."

Federation of Residents and Ratepayers Association president Kevin Kaeding said land tax was one of the most common complaints from property owners.

"Something just had to be done," he said.

"A lot of people have been hurting for a long time because of land tax."

Premier Mike Rann said the Government had been well aware of the "disproportionate spike" in land tax bills brought about by the property boom.

"I am seldom this political, but the last time land tax was raised was by the Liberals in 1994," he said. "The last time land tax was cut was by the ALP in 1990."

But Opposition treasury spokesman Rob Lucas described the announcement as "a massive backdown" by the Government after months of pressure from the Opposition and land tax pressure groups.

"It is two years too late," he said.

"All this time, the Government has been saying it did not have the money to provide tax relief.

"We have been saying all along there is money to provide modest tax relief."

Mr Lucas said the Government had been expecting more than $280 million in land tax collections for the current financial year, compared with $198 million in the previous year.

Treasurer Kevin Foley said there would be no impact on the Budget and that "this is an affordable package".

"For the vast majority of people we are tearing up their land tax bills," he said.

Mr Foley said state finances remained strong and he could comfortably predict future state Budgets would be in surplus.

He said anyone who was saying the cuts were too small was playing politics and he challenged the Liberals to say how they would fund any changes in land tax.

Mr Lucas said the Liberal Party would bring out a comprehensive tax package before the next state election.

"I don't believe this (the Government announcement) will kill land tax off as an election issue," he said.