Land Tax

The Hon. F. PANGALLO (15:15): I seek leave to make a brief explanation before asking the Treasurer a question about his current irritant, land tax.

Leave granted.

The Hon. F. PANGALLO: It is fair to say that the government's proposed overhaul to land tax laws has caused widespread outrage across the community, not just from the top end of town, as some people are saying, but also thousands of hardworking and aspirational mum-and-dad investors who have strived all their lives to provide a strong financial future for themselves and their families.

They have been described by one of the state's most successful homegrown property developers as the greatest threat to the state's economy that he has seen in his 40-plus year career, something that has caused him to seek out opportunities interstate for the first time. Now we read they are threatening to lead to a revolt in the Treasurer's own party, such has been the level of secrecy in planning these changes and the unrest it has caused many Liberal MPs in their electorates.

I note that in their election manifesto last year the Premier didn't allude to the extent of their full aggregation reforms. My questions to the Treasurer are, and I am happy to take these on notice:

1. Can you explain to a mum-and-dad investor with only three residential properties totalling $1.5 million how they are supposed to find an extra $20,000 per annum to cover the 2,000 per cent increase to their land tax bill?

2. How many South Australians will the changes to land tax aggregation impact, and when will the government release their modelling?

3. How many South Australians with average holdings—that is, properties valued at around the $450,000 mark—will be captured by the changes to the land tax aggregation?

4. Has the government done any modelling to understand how the changes to the land tax aggregation will combine with a statewide revaluation initiative to impact the state's property market?

5. Given the government has estimated it will reap an extra $40 million per annum from the changes to aggregation, yet the proposed changes to land tax rates will only deliver relief of around $9 million per annum, will the government accelerate its full rate cap to provide relief faster than its forecast staged seven-year reduction?

6. Will the government consider grandfathering its changes to land tax aggregation to ensure property owners who have been playing by the rules are not forced to sell off their assets once the changes are introduced on 1 July next year?

7. Does the Treasurer have any modelling that outlines the impacts of a property fire sale that could be triggered by the combination of aggregation changes and the statewide revaluation?

8. Does the government have any indication of how many vulnerable South Australians who currently rent low income houses from these mum-and-dad investors will be turfed out if the aggregation changes to land tax lead to a fire sale of investment assets?

9 Can he advise how much it will cost the government per year to collect these increases in taxes?

10. Can he provide details of how he or the government plan to sell or educate the public about the proposed changes?

The Hon. R.I. LUCAS (Treasurer) (15:19): A number of those questions I have already addressed answers to in response to earlier questions. I can repeat very quickly. This is not a secretive bill, because I have indicated, unlike virtually every other bill that I have ever seen in this place, it will go out to public consultation prior to its actual introduction into the house. Virtually all tax bills that I am familiar with are introduced by the government of the day without public consultation before them. So it is not going to be secretive; there will be an open process of consultation for everybody in relation to the issues. In relation to—

Members interjecting:

The Hon. R.I. LUCAS: I would like to address the questions of the Hon. Mr Pangallo rather than the cacophony of squealing from the opposition benches, if that is possible. The Hon. Mr Pangallo deserves the respect of this chamber.

Members interjecting:

The Hon. R.I. LUCAS: Are you finished? Let me address some of the questions the Hon. Mr Pangallo has raised. Some of them have already been addressed by way of responses to earlier questions that I have raised. It is not secretive; we are going to go out to public consultation. The other issue, as I highlighted earlier, is that there are many thousands of South Australians who will actually benefit from the land tax reforms, the increasing of the threshold and the reduction in the land tax rate.

Anyone who owns property between $390,000 and $450,000—the honourable member referred to that in one of his latter questions; this is site value, not total property value—won't pay land tax on that particular property if that is their sole investment property because the land tax threshold is being increased to $450,000. Many thousands of South Australians' investments will be advantaged by not having to pay land tax.

Those—as I indicated earlier and I won't repeat the examples again—in between, currently, just over $1 million in property values and $5 million will be advantaged by a massive reduction from 3.7 per cent to 2.9 per cent. If you own a single commercial property at $3½ million or $4 million, you are currently paying 3.7 per cent and you will be paying 2.9 per cent, a massive advantage in terms of both that individual owner and the property market and the properties that they are actually competing with.

As the Premier and I have indicated and highlighted right from the word go, there will be some people who will end up paying more land tax than they are currently paying. I have given the example of someone who can own $3 million worth of properties in seven separate companies or trusts and not pay a single dollar in land tax.

In the particular circumstances to which the honourable member referred, if that individual or person, whoever it is, was to own those three investment properties of $1.5 million total in terms of site values and owns them as an individual, they are already aggregated in South Australia and they will be paying the higher rate of land tax. The only way they reduce that level of land tax is that, as an individual, they form themselves into three separate companies or they form themselves into three separate trusts. In that way, they minimise the level of land tax that is being paid. There are some individuals in exactly the same circumstances who don’t do that and who end up paying the land tax—I don't know the exact numbers—at the higher rate to which the honourable member referred.

The government has indicated, in relation to this package, whilst overall we will be collecting just under $10 million less in our first year and up to $20 million less in our third year (2022-23) from the land tax reform package, there will be many winners and there will be some who lose and have to pay more land tax. That is the inevitable result of a land tax reform package. You can't have a land tax reform package where everyone in the world benefits—well, you can if you are not facing a $2.1 billion reduction in GST revenue.

The most important question, which I have publicly stated previously—I am not sure that I did in response to earlier questions and I am happy to repeat again—is that I have given a number of public commitments, and the Premier has repeated those commitments since his return from leave, that the government is prepared, as part of its negotiation, instead of phasing in the seven-year reduction of 3.7 down to 2.9 for property values above $5 million, to look at doing that more quickly—perhaps in three years, perhaps even quicker than that. That will be part of the discussion that I have indicated publicly and the Premier, upon returning from leave, has also indicated publicly.

The government is prepared to talk seriously and to consult seriously with interested stakeholders in relation to this particular issue, and then we will bring back to the parliament the final package. Ultimately, it will be a decision for the parliament to decide whether or not they are prepared to support the final shape and structure of the land tax reform package that we have.