Treasury – Property tax | Tasmanian Green MPs
Mrs O’CONNOR – Treasurer, in February of this year you reverted to your previous position not to change the property tax and announced that you would ask the Treasury to review the land tax provisions of Tasmania.
In March, you announced that the property tax system would be adjusted to increase the property value at which property tax becomes payable and also to increase the maximum threshold. It cost the state budget $ 14 million per year, $ 56 million more than forecast. Did the Treasury review recommend this approach?
Mr GUTWEIN – What I asked Treasury to do is look at a range of different models and also see how we could modernize what we were doing.
One of the problems we had was that the levels at which the property tax applied had been set many years ago.
Mrs O’CONNOR – Did the Treasury recommend it or did it offer you choices?
Mr GUTWEIN – There were choices, a range of options.
Mrs O’CONNOR – Lobbyists for lower property taxes, like Ms Elliot, have argued that Tasmania has the highest property tax cost for land valued at half a million dollars in the country. This is the main argument used to modify property tax thresholds. Do you agree that Tasmania also has one of the lowest top property tax rates in the country at 1.5%?
Mr GUTWEIN – I should review the advice provided by the treasury. Compared to some jurisdictions, we are expensive, compared to others, we are quite attractive. Our biggest problem – and I announced this during the election campaign – which I think will impact a lot of the people we represent, whatever their means, whether small or large property taxpayers, concerns the upcoming evaluations. We have asked the Treasury to do work to determine if an arrangement can be put in place to cap future property tax bills. This is something that has been done in other countries with varying degrees of success. The Treasury is currently working on certain options.
Mrs O’CONNOR – Isn’t it true, however, that in Tasmania people who own multiple properties pay a proportionately much cheaper bill here than people from other states like Victoria, South Australia, Western Australia, New Wales? South and Queensland?
Mr GUTWEIN – Based on the value of the property, I am not sure this is the case. In fact, I think most other jurisdictions have much more generous thresholds. But I would need to refer to the original advice we received. As for our land base, it is obviously very narrow. Other jurisdictions such as New South Wales are now reviewing this transfer agreement, where they are considering stamp duty changes for an ongoing property tax. ACT Chief Minister Andrew Barr is always ready to prepare for his 20-year transition plan, bearing in mind that they have a very different tax system from ours, largely based on what ‘they charge rates as a starting proposition.
Mrs O’CONNOR – As you know, the market value of properties in Tasmania is increasing exponentially, almost every week, Treasurer. Therefore, people who are fortunate enough to own multiple properties see their wealth increase due to the increase in the market value of their properties. Now they are getting another giveaway through property tax breaks. But how –
Mr GUTWEIN – Just on that point, before we continue, by and large many of these properties will be leased by businesses, in many cases small business owners. The vast majority of the leases I have been involved in would have a transfer for most of the costs associated with the leased premises, including property taxes.
Mrs O’CONNOR – What does it mean, “a passage”?
Mr GUTWEIN – If you are the owner of a small business that runs the restaurant in one of the larger buildings across the street to the mall, your lease will more than likely pass the cost of property tax back to you. Every lease that I myself have been involved in has always had this transfer agreement, whether I am signed as a tenant or whether it is a property that I have owned. So basically it’s not the owner who pays this tax, even if their value goes up. This is the person who rents the property.
Mrs O’CONNOR – How do we ensure that these savings are passed on to small businesses and tenants, as the budget documents claim they could be passed on?
Mr GUTWEIN – For small business owners, any savings in terms of a property tax bill, the knock-on effect on those small businesses would increase that. Whatever the property tax, this is normally what a tenant would pay. So, by reducing it, they take advantage of it. As for residential rates, it is more difficult because they are normally taken into account in the gross rent. But, again, in terms of leases and the length of the lease, this will determine whether a property tax increase or decrease is passed on or not.
Mrs O’CONNOR – We believe the savings are very unlikely to be passed on to tenants, given the state of the private rental market. But we will be watching very closely.