Detailed analysis conducted by Treasury has now revealed that 22,300 property ownerships comprising individuals, companies and trusts in South Australia own multiple properties and are already paying land tax on aggregated land values.
Put simply, this means that many South Australians have continued to invest in property even though they might be paying land tax at our currently uncompetitive top land tax rate of 3.7%.
Treasurer Rob Lucas said these facts ‘blow out of the water’ claims made by opponents of the land tax reform package that almost everyone has used trusts and companies to minimise the amount of land tax they pay.
“In fact, there are 16,300 ‘mum and dad’ investors who own multiple properties either by themselves or jointly with another individual(s),” said Mr Lucas.
“Many of them will be paying land tax at the uncompetitive top rate of 3.7% because it becomes payable at a threshold of $1.3 million.
“Whilst these ‘mum and dad’ investors are probably unhappy at the 3.7% tax rate, they have nevertheless received a sufficient return from rental income to justify continuing to invest in multiple properties.”
So what this means is, at the moment, an investor with total residential property valued at $2.6 million (7 x $375k) is paying $62k land tax and still making a return from rental income to justify continuing to invest in residential properties.
Under the Government’s reform package, these investors will receive a significant reduction in their land tax bill.
However, some investors with exactly the same property portfolio of $2.6m are not paying a single dollar in land tax because they have structured themselves into 7 separate companies or trusts.
“This situation is intolerable and unfair and after 12 weeks of consultation the Property Council and other opponents of the land tax reform package have still not been able to defend this inequity,” said Mr Lucas.
“The Government’s land tax reform package will not only reduce the total amount of land tax being collected, but will also introduce a much fairer system.”