REINSW is currently lobbying the state govt for an abolition on land tax for all residential property, as it believes that market forces alone will not be enough to avert what it views as a looming rental crisis in NSW. Along with the recent super changes (which may well see approaching retirees dump their IP's in favour of more attractive tax free benefits in super) and the waning investor activity in NSW, it is going to leave many tenants saving their pennies not for home deposits, but increasing rents, at least until investors re-enter the market. Land tax has become a real hardship for many of us over the past five years, as values have soared and thresholds not increased enough to cover costs. Yet the NSW govt has reaped the rewards and fattened it's pockets with this revenue source so I can hardly see it backing down now and getting rid of the tax altogether. What alternatives do you as investors see as realistic solutions to this ever growing problem?
1. buy in multiple states, or at least in other states where land tax isn't as bad 2. buy shares/managed funds instead ! Land tax is not only an unfair impost on residential property investors that doesn't have a similar cost to sharemarket investors, it is also unpredictable - and thus very difficult to effectively budget for. I'm still aiming to buy some properties in Sydney in the next few years, but I'll need to assess the land tax costs at the time and determine whether it is really worthwhile based on the additional costs. The government (both state and federal) with their current policies are strongly encouraging people to invest in Australian businesses (ie the sharemarket) rather than Australian realestate. Once the rent crisis hits (and it will), they will change their policies, and it may well become a more favourable environment for real estate again. In the meantime, you really need to do your sums to work out whether your investment stacks up against the costs (both now and in the future!!).
I think this will trigger strong rental demand over the next few years, returns will come back to a 'normal' level and investors will flock back in droves... But who knows
land tax will never be abolished! it generates far too much revenue for the state government, and given that they can't manage things effectively they need all the money they can get, and they don't have to do anything to get it! why would a government give that away??
I'm sure you're right here, Joanna, in that the revenue created by this waterfall of funds (especially in increasing amounts since the 02-04 boom) is just too relied upon to be given up altogether. There are alternatives, however, that should be further explored. Raising the threshold and allowing trusts to have the threshold as well as individuals would be a start. As well as this, I believe that if a property has been owned for a particular period of time by the same owner, that concessions should apply. After all, there are many self funded retirees who rely on their rental income (often on fully paid off properties) yet have to fork out increasing amounts for land tax for the rest of their days.
I have read that the REINSW believes Land tax needs to be abolished soon otherwise rental stock shortage will become so acute that people will have nowhere to live But the fact is with 1.5% vacancy rates in Sydney now - Rent crisis grips outer suburbs as rates bite - National - smh.com.au things must change at some point , and we may well find some sweeteners by both NSW Gov and opposition in the next few weeks leading up to the March election. "Sydney's overall rental vacancy rate in December equalled the year's low of 1.5 per cent, down from 2.6 per cent the previous December, despite it being a month in which renters tend to stay put. The squeeze in the outer suburbs - more than 25 kilometres from the CBD - was even more dramatic, halving from 3.3 per cent to 1.6 per cent. This area includes Hornsby, Gosford, the Blue Mountains, Campbelltown, Sutherland and Penrith."
I actually take an opposing view in that we should have no threshold and a 'land tax' or similar should be applied to all property holders in the state. Akin to council rates. Some of the reason why I see a broad based land tax as more equitable are - Level the playing field, everybody has the same cost structure. I am competing for tenants with single property owner who can then lower his rents as he doesn't have to cover a land tax. - everybody in the state is paying their share of reveneu that is required to run the state - A broad base is a better method for the state gov to control their revenue as everybody pays a little bit and is predictable. - If the federal gov can convince the population that a GST is good for them then the State Gov should be able to sell a broad base land tax. Cheers
I understand where you're coming from Handy, but you have to ask where did the revenue come from prior to the last boom, which saw prices double in some cases over a 24 mth period? The fact is that the windfall from land tax has doubled (if not tripled) over the last 10 yrs yet does the govt have anything extra to show for it? Not trying to sound bitter or anything of course
This is a whole different discussion. This is all about fiscal responsibility rather than letting the expenses meet the income that all governments seem to be so good at. Or conversely the reason that Sydney doesn't have an alternate dam on the Shoalhaven is because there was no money available I don't know the actual revenues raised either before or after the RE boom and would be interested in the actual figures that are available. Irrespective of the fact that governments are irresponsible and inefficient with the monies they raise my points hold true. A fairer way of the state raising revenue is by taxing everybody fairly rather than the lumpy method currently engaged in ie land tax, poker machine tax, payroll tax etc. More to the point if they raised taxes through a more direct channel, as per my previous post, then the government may actually have to be more accountable for the manner in which they spend the money all voters are now paying. Cheers
Financial Advice – Do you need help Do you need help with investment strategies, don’t want to buy the wrong stocks, or you just need a regular income stream? We provide the research to ensure your investment selections achieve the goals. This is the value of advice. » Contact us today
