Excessive and inefficient taxes are killing the property sector in South Australia, robbing the state’s economy of investment and jobs at a time when sectors such as mining and manufacturing are struggling, the state’s leading property industry lobby group says.
In its submission on a discussion paper for the South Australia State Tax Review, the Property Council of Australia said businesses within the state’s borders face an exorbitant and inefficient burden when it comes to operating costs compared with their counterparts in other states.
Whereas on a square metre basis, the average owner of office related property in the Melbourne CBD paid only $30.76 in statutory charges last year, for example (council rates, water rates, land tax and other statutory fees and charges), the Council’s 2014 Benchmark Report indicates that their counterparts in Adelaide coughed up an average of $41.24.
Whereas landlords of neighbourhood shopping centres throughout South Australia were slugged a whopping $52.62 per square meter for those charges, meanwhile, those in New South Wales paid just $35.98.
“Inefficient taxes act as a handbrake on the economy – impeding transactions, stifling activity, inhibiting job growth and constricting productivity,” the Property Council says in its submission.
“Replacing inefficient taxes, such as stamp duty, with more stable and efficient revenue sources, such as broad-based taxes is a crucial step toward improving the economic wealth of the nation (and of South Australia).”
At the top of the list is stamp duty, which the Council says is ‘very inefficient’, volatile in nature, acts as a discouragement to people relocating as their circumstances change (i.e. to take advantage of new employment opportunities) and has a raft of other negative effects.
The ideal way to replace this would be to broaden the GST, the Council says, but other revenue options should also be considered.
Next on the list was land tax. The Council argues a narrow base and a high rate are putting commercial businesses operating in South Australia at a competitive disadvantage compared with peers in other states.
Property worth around $579,001, for example, would attract no land tax in either Queensland or Western Australia (it would fall beneath the thresholds in that state). On that same property in SA, owners would be slugged $1,315.
The Council would like to see the abolition of land tax aggregation and a lowered flat fee that represents the administrative cost of transferring property titles.
Finally, the Council called for a review into local government rate setting and valuation principles to ensure transparency in the system.
The Council’s submission comes as the SA Government is reviewing taxation arrangements in an effort to make the system fairer, efficient and more supportive of business activity and entrepreneurship.
A discussion paper released by the government in February canvassed a range of options, including the use of an annual property tax to phase out conveyancing duty or insurance duty and the setting of tax revenues at a certain level of the economy in order to protect revenues.
In its submission, the Master Builders Association of South Australia called for stamp duty to be payable by the seller rather than the buyer, owners of property to be allowed to capitalise their land tax and defer payment (with interest) until the property is sold and the home owner has access to cash from the sale, and a ‘payroll tax holiday’ for new jobs lasting up to three years in order to reward business for long-term job creation.