Skip to content Skip to main navigation

News

Chamberlains - complete legal services for business

Renters to be slugged $900 with land tax changes

By Canfan - 1 July 2014 37

From today struggling Canberra renters will be forced to bear the brunt of ACT Labor’s land tax hikes with a $900 fixed charge as well as a percentage of the land value which will raise the government an additional $10 million this financial year. It will particularly affect units and is yet another attack by this government on housing affordability in the ACT and an unfair tax which hits the lowest end of the market hard, Shadow Treasurer Brendan Smyth said today.

“Andrew Barr is hiking land tax on units from today meaning those who are doing it tough will be forced to pay hundreds of dollars just to keep a roof over their heads. This is a fixed charge property owners will have to pass on,” Mr Smyth said.

“ACT Labor is driving up rates by 10 percent a year for people who own their own homes now the government will start slugging renters with extra costs.

“Because the government has maxed out the credit card on unaffordable and unwanted capital works projects ACT residents are being squeezed to the limit to pay for years of irresponsible economic management.

“Furthermore, mum and dad investors will find it harder to provide for their own futures with this land tax increase. It will add to the swathe of government regulations stopping investment in its tracks and driving it across the border.

“Andrew Barr needs to rethink this tax because he is hitting Canberra families when they are struggling enough at the moment,” Mr Smyth concluded.

(Brendan Smyth Media Release)

What’s Your opinion?


Please login to post your comments
37 Responses to
Renters to be slugged $900 with land tax changes
1
dungfungus 9:45 am
01 Jul 14
#

Gee, thank goodness the ACT doesn’t have a budget emergency too!
I wonder how much land tax is in Singapore?

Report this comment

2
m_ratt 9:59 am
01 Jul 14
#

What a load of b*llocks.
It is not possible for any such charges to be directly passed on to renters.
A landlord may be inclined to seek higher rent, however they can only get what the market is willing to pay. This is just another cost of holding an investment, which is irrelevant to any tenant.

Have interest rate decreases (on IP mortgages) been passed directly on to tenants? Of course not.

Report this comment

3
VYBerlinaV8_is_back 10:04 am
01 Jul 14
#

Although the charges cannot be passed on directly, I’ll be putting more pressure on my property managers to increase the rent than I otherwise would. Normally it’s best to just let the market do its thing, but with costs like this I will do what I can to recover the funds.

Report this comment

4
patrick_keogh 10:22 am
01 Jul 14
#

dungfungus said :

Gee, thank goodness the ACT doesn’t have a budget emergency too!
I wonder how much land tax is in Singapore?

In Singapore it is a function of rental value. For most properties it is 10%p.a. although as rent goes up so does the tax as a percentage. That is so much higher than in the ACT that it is no surprise that nobody lives in Singapore any more. Oh wait.

Report this comment

5
Maya123 11:07 am
01 Jul 14
#

patrick_keogh said :

dungfungus said :

Gee, thank goodness the ACT doesn’t have a budget emergency too!
I wonder how much land tax is in Singapore?

In Singapore it is a function of rental value. For most properties it is 10%p.a. although as rent goes up so does the tax as a percentage. That is so much higher than in the ACT that it is no surprise that nobody lives in Singapore any more. Oh wait.

I don’t have a rental now, but when I did I paid more than 10% of my rental income on land tax, so more than is paid in Singapore. Ten percent of rental income sounds a fairer system to me. Here it is based on land value, not the value of the house, and therefore potential rental income, on similar blocks of land. So, a small, older, three bedroom house, maybe showing its age, will have a lower (more affordable) rent than a McMansion on the same block of land, but same land tax. Our land tax (and rates) encourages older, smaller houses to be replaced with oversized McMansions and rents to then rise and become less affordable.
Fortunately I bought my rental house in the last big slump and was rewarded as its value rose dramatically. This made up for low rents and high land tax.

Report this comment

6
Yman 11:38 am
01 Jul 14
#

Landlords stand no chance to pass on the land tax cost in short term. It would be passed on in a longer term, say 1 year, but the price of investment property would reach another equilibrium in the same time. So it’s still a bad news for owners rather than tenants.

Report this comment

7
beejay76 11:56 am
01 Jul 14
#

Standard tenancy agreement:

42 The lessor is responsible for the cost of the following:
(a) rates and taxes relating to the premises;
(b) services for which the lessor agrees to be responsible;
(c) services for which there is not a separate metering device so that amounts consumed
during the period of the tenancy cannot be accurately decided;
(d) all services up to the time of measurement or reading at the beginning of the tenancy;
(e) all services after reading or measurement at the end of the tenancy providing the
tenant has not made any use of the service after the reading.

This is the worst kind of misinformed crap. Shame on you, Canfan for blindly re-posting the kind of rubbish that undermines our democracy by allowing politicians to deliberately lie to the people. I’ll wager Mr Smyth *knows* what he is saying is incorrect and is saying it anyway. That would be the dictionary definition of a lie.

Report this comment

8
Ghettosmurf87 12:12 pm
01 Jul 14
#

beejay76 said :

Standard tenancy agreement:

42 The lessor is responsible for the cost of the following:
(a) rates and taxes relating to the premises;
(b) services for which the lessor agrees to be responsible;
(c) services for which there is not a separate metering device so that amounts consumed
during the period of the tenancy cannot be accurately decided;
(d) all services up to the time of measurement or reading at the beginning of the tenancy;
(e) all services after reading or measurement at the end of the tenancy providing the
tenant has not made any use of the service after the reading.

This is the worst kind of misinformed crap. Shame on you, Canfan for blindly re-posting the kind of rubbish that undermines our democracy by allowing politicians to deliberately lie to the people. I’ll wager Mr Smyth *knows* what he is saying is incorrect and is saying it anyway. That would be the dictionary definition of a lie.

I’m no Brendan Smyth apologist, but just because a landlord is responsible for a cost, it doesn’t mean that the cost won’t be passed on to the tenant in the form of rent, it just means it won’t be a charge ON TOP OF rent, like electricity/water/etc.

A landlord recoups costs such as land tax/rates/repayments/unmetered bills/etc through the rent that they charge, to the extent that the market will allow them to.

Therefore, if there is scope to charge more in order to recoup new ownership costs and not lose your tenants, then by all means, landlords will do so. Any landlord, on negotiating a tencancy agreement, is entitled to set the price at whatever they so choose, it’s just that a tenant may not accept a new higher price if other landlords out there are not passing on the additional cost, but are instead absorbing it.

Report this comment

9
pierce 1:11 pm
01 Jul 14
#

I’ve just been through the process of looking for a new rental house, being accepted for 3 out of 4 (the fourth had already gone). All of the agents offered to drop the rent at the merest hint of indecision.

Any landlord that thinks now is the time to raise rents might be in for a shock.

PS – A more respectable headline might have been “Renters to be slugged $900 with land tax charges – Smyth”. Unless of course, journalism now just means treating press releases as stories.

Report this comment

10
rommeldog56 1:11 pm
01 Jul 14
#

Not owing an investment property, correct me if I am wrong, but wouldn’t these ACT Gov’t charges be tax deductiable for the landlord, from the ATO ?

If so, perhaps presents an interesting problem Federally too ?

How far will the Fed’s allow States to ramp up their revenue by introducing charges/taxes/levies/fees that are in part or full, claimable by the payee through the Fed’s Taxation process (eg. through negative gearing, income tax, etc) ?

Also, does this apply to commercial rents ? Impact on employment, etc ?

Report this comment

11
patrick_keogh 1:25 pm
01 Jul 14
#

Price is a function of three variables: cost, supply and demand. If demand for rental property exceeds supply as it has done in most years in the last twenty, then price will be significantly higher than cost and more suppliers will enter the market until a new equilibrium is reached. Equilibrium is where the ROI is adequate, given the level of risk and a landlord will probably accept a level of return that is less than the stock market because the risk is lower.

If supply exceeds demand has it has done recently, then it would be reasonable to expect to see falling rental prices. The increase in tax will just result in the price falling less than it would have otherwise. Either way the market will stabilise at the level where supply and demand produce appropriate ROI.

Interestingly the BS press release wants to have it both ways: “a fixed charge property owners will have to pass on” and “mum and dad investors will find it harder to provide for their own futures with this land tax increase”.

Report this comment

12
Maya123 1:26 pm
01 Jul 14
#

rommeldog56 said :

Not owing an investment property, correct me if I am wrong, but wouldn’t these ACT Gov’t charges be tax deductiable for the landlord, from the ATO ?

If so, perhaps presents an interesting problem Federally too ?

How far will the Fed’s allow States to ramp up their revenue by introducing charges/taxes/levies/fees that are in part or full, claimable by the payee through the Fed’s Taxation process (eg. through negative gearing, income tax, etc) ?

Also, does this apply to commercial rents ? Impact on employment, etc ?

A landlord/lady can claim Land tax and rates in their tax return.

Report this comment

13
dungfungus 1:28 pm
01 Jul 14
#

rommeldog56 said :

Not owing an investment property, correct me if I am wrong, but wouldn’t these ACT Gov’t charges be tax deductiable for the landlord, from the ATO ?

If so, perhaps presents an interesting problem Federally too ?

How far will the Fed’s allow States to ramp up their revenue by introducing charges/taxes/levies/fees that are in part or full, claimable by the payee through the Fed’s Taxation process (eg. through negative gearing, income tax, etc) ?

Also, does this apply to commercial rents ? Impact on employment, etc ?

All commercial properties are assessed with land tax. If the property is rented the costs (like rates, water and electricity) are passed on to the tenant. It’s inflationary.
The $10 million Barr will collect will fund the GWS aerial ping pong team for another couple of years so it’s all in a good cause.

Report this comment

14
patrick_keogh 1:33 pm
01 Jul 14
#

rommeldog56 said :

Not owing an investment property, correct me if I am wrong, but wouldn’t these ACT Gov’t charges be tax deductiable for the landlord, from the ATO ?

This is the heart of the matter. Our federal system has resulted in a system where the number one activity of both state and federal government is cost shifting. You see it every day in health, education, transport… every aspect of the portfolio where changes to public services are made with the specific intent of driving the consumer to services provided by the other level of government. So the ACT government will get a buck out of these new tax arrangements of which the landlord and tenant will end up paying around sixty cents and the commonwealth will have to pay the other forty cents through reduced tax receipts.

It would be funny if it wasn’t so pathetic, but you can hardly lay the blame at the feet of the ACT government any more than the other eight governments involved. They are all doing it. I have this terrible feeling that when Tones espouses greater independence for the states he hasn’t really grasped the impact this will have on commonwealth revenue.

Report this comment

15
bigred 4:46 pm
01 Jul 14
#

I suspect Mr Barr may be about to see the limits of the land tax magic pudding. I predict that some landlords at the economical end of the market are likely to deploy their capital in other markets that provide better rates of return. This could trigger some shortages in some segments of the market. Brendan knows the EL1 second property owners will be very unhappy and senses some votes.

Secondly, as discussed elsewhere it is not like we are getting great outcomes from the money they get already. Why on earth should they get more to do a carney with?

Report this comment

1 2 3

Related Articles

CBR Tweets

Sign up to our newsletter

Top
Copyright © 2016 Riot ACT Holdings Pty Ltd. All rights reserved.

Search across the site