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Treasury - Land Tax

Cassy O'Connor MP  -  Monday, 6 September 2021

Tags: State Budget, Treasury

Ms O'CONNOR - Treasurer, in February this year you backtracked on your previous position to not change land tax and announced you'd ask Treasury to review Tasmania's land tax arrangements.

In March you announced that the land tax system would be adjusted to increase the land value at which land tax becomes payable and also to increase the maximum threshold. This has cost the State Budget $14 million a year, $56 million over the forward estimates. Did the review conducted by Treasury recommend this approach?

Mr GUTWEIN - What I asked Treasury to do was to review a range of different models and also to look at how we could contemporise what we were doing.

One of the issues we had was that the levels at which land tax applied were set many years ago, so one of the options that was put up was to contemporise the levels at which land tax applied, which is what we have introduced.

Ms O'CONNOR - Did Treasury recommend it or did it provide you with choices?

Mr GUTWEIN - There were choices, a range of options.

Ms O'CONNOR - Lobbyists for reducing land tax, like Ms Elliot, have argued that Tasmania has the highest land tax cost for land valued at half a million dollars in the country. This was the main argument used for changing land tax thresholds. Do you acknowledge that Tasmania also has one of the lowest maximum land tax rates in the country, at 1.5 per cent?

Mr GUTWEIN - I'd need to look back at the advice provided by the Treasury. Compared to some jurisdictions we are expensive, compared to others we're quite attractive. Our single biggest issue - and I announced this in the election campaign - one that I think will impact on a lot of the people we represent, regardless of their means, whether small land tax payers or large, is with the upcoming valuations. We've asked Treasury to do some work as to whether or not an arrangement can be put in place to cap future land tax bills. It's something that has been done in other jurisdictions with varying degrees of success. Treasury are working on some options at the moment.

Ms O'CONNOR - Isn't it true, though, that in Tasmania those people who own multiple properties pay proportionally a much cheaper bill here than people in other states like Victoria, South Australia, Western Australia, New South Wales and Queensland?

Mr GUTWEIN - Based on property value, I'm not certain that's the case. In fact, I think most of the other jurisdictions have far more generous thresholds. But I'd need to refer myself back to the original advice we received. In terms of our land tax base, obviously it is very narrow. Other jurisdictions such as New South Wales are now looking at that transference arrangement, where they're looking at stamp duty changes to an ongoing property tax. The ACT Chief Minister Andrew Barr is always prepared to spruik his 20 year transitional plan, bearing in mind that they have a much different taxation system than we do, largely on the basis that they charge rates as a starting proposition.

Ms O'CONNOR - As you know, the market value of properties in Tasmania is soaring exponentially, almost on a weekly basis, Treasurer. Therefore, people who are lucky enough to own multiple properties, their wealth is going up as a result of the increase in the market value of their properties. Now they're getting another gift through land tax concessions. But how -

Mr GUTWEIN - Just on that, before you go on, in the main, many of those properties will be leased by businesses, in many cases small business owners. The vast majority of leases I have ever been involved in would have a pass through for most costs associated with the leased premises, including land tax.

Ms O'CONNOR - What does that mean, 'a pass through'?

Mr GUTWEIN - If you're the small business owner running the restaurant in one of the larger buildings on the strip up to the mall, your lease more than likely will pass through to you the cost of land tax. Every lease I have ever been involved in myself has always had that pass through arrangement, whether I'm signed as tenant or if it's been property I have owned. So, in the main, it's not the property owner who pays that tax, albeit their value is increasing. It's the person who's leasing the property.

Ms O'CONNOR - How do we make sure those savings are passed on to small businesses and tenants, as the Budget papers claim they might be passed on?

Mr GUTWEIN - In terms of small business owners, any saving in terms of the land tax bill, the pass through effect to these small business would pick that up. Whatever the land tax is, it's normally what a tenant would pay. So, by decreasing it, they benefit. In terms of residential rates, that's more difficult because normally it's captured as part of the gross rent. But, again, in terms of leases and the timeframe of the lease, that will determine whether or not an increase or a decrease in land tax is passed back.

Ms O'CONNOR - We think there is very little chance that the savings will be passed on to tenants, given the state of the private rental market. But we'll be watching very closely.