It’s perhaps not as hated or understood as that most insidious of property charges, stamp duty, but ever since it was introduced in Australia almost 140 years ago, land tax has become just as big a cash cow for State Governments.
Its initial aim – back in the 19th Century – was as a sort of wealth tax to encourage the owners of large holdings of land to break them up and sell them off.
While that had the desired effect way back then, the other thing it showed the Government of the day was that land tax was something which could help fill their coffers and they really had to give nothing in return.
So, more than a century after it served its purpose and should have been scrapped, we still have this insidious tax which afflicts investors for no particular reason.
It seems that, even when it has outgrown its original purpose, once we get a tax in Australia the chances of getting rid of it are negligible.
As if that wasn’t bad enough, now we have the Queensland Government announcing that it will further penalise property investors by dragging interstate owners into its land tax regime.
It’s rather startling that at a time when property fees, levies and taxes account for about half the cost of a new house and land package in Australia, thereby seriously damaging housing affordability, that the Queensland Government has decided to expand the reach of land tax across its borders.
When announcing the proposed change late in 2021, it labelled the change as closing a loophole – which, as we have come to expect from politicians, was a lie.
The loophole, apparently, was a problem because it allowed interstate investors with properties across multiple states to access tax-free and progressive rate thresholds multiple times.
For example, if you are a Sydney-based investor who owns property there and property in Queensland the Queensland Government will add up the value of both properties including the Sydney one to determine how much land tax you have to pay in Queensland.
So, while that Sydney investment property has nothing to do with Queensland, the Queensland Government would like to make you pay them for the privilege of owning it. Makes perfect sense, doesn’t it?
The State Government’s announcement glosses over the changes describing it as an adjustment which will make things fairer and more equitable.
I’m not sure interstate investors will see it that way.
Indeed, there’s nothing fair or equitable about this at all. The Queensland Government will be taxing Australians on property they own in other states. It’s outrageous.
The changes, if are passed into law, will also earn the State Government an extra $20 million every year.
Yet again, the housing industry is being used as a cash cow to prop up government coffers – a never-ending process that has destroyed housing affordability in Australia and has also created a rental shortage crisis by discouraging investors.
How can this government justify charging property investors land tax on properties which aren’t even within Queensland?
Talk about putting a handbrake on investment at a time when property is really driving the economy.
It would seriously discourage investors from buying in Queensland – a state which already has a chronic shortage of rental properties.
Now, some might say, so what? Less competition from those pesky interstate buyers. But that’s a one-dimension view of the situation and doesn’t take into account how far reaching the flow-on effect will be.
We already have a serious rental shortage in Australia with vacancy rates of less than 1% in most locations – and measures like this will make that worse in Queensland.
There is a long history of state governments of making changes that make housing affordability worse and rental availability worse.
Every time they announce a policy it is usually detrimental to property investment. Politicians think they are slugging an unpopular minority so there is no political damage involved.
But investors will sell their Queensland properties and buy elsewhere – and ultimately the people who will pay the price are the renters and wannabe first-home buyers who are struggling to save a deposit for a home.