Skip to content Skip to main navigation

News

Excellence in Public Sector consulting

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, or connect with
37 Responses to
Renters to be slugged $900 with land tax changes
Filter
Showing only Website comments
Order
Newest to Oldest
Oldest to Newst
davo101 2:19 pm 03 Jul 14

tim_c said :

I hardly think Singapore is a fair comparison – do you have any idea how much less income tax they pay?

Sure do. So in Australia if you are on the median income ~$57400 then you’ll pay $10200 in income tax and another $1150 in Medicare levy for a tax tax of 19.7%. In Singapore if you’re on the median income of S$67200 then you’ll pay S$2450 in income tax. Hooray. However, you know that pension you expect to get when you retire and those medical services you like to have around? In Singapore you are required to pay for those yourself with a compulsory contribution to the CPF. So that’s an extra S$12000 giving a total of 21.5% of your income.

So for someone around the middle the situation is pretty much the same, just different cultural approaches to how to achieve things.

tim_c 12:19 pm 03 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?

I hardly think Singapore is a fair comparison – do you have any idea how much less income tax they pay?

Ghettosmurf87 12:11 pm 03 Jul 14

Sandman said :

Ghettosmurf87 said :

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.

Not really. A landlord will try to get the maximum possible no matter what. All this does is cut into their profits. The market dictates the rental prices. I know of places that have been empty for 12 months because the owners aren’t willing to drop their price to a realistic level. They’re too used to the good old days of maximum returns and can’t handle the realistic levels.

I agree completely with you. My response that you quoted was to the person before me who claimed that landlords couldn’t pass the cost of rates on to the renter because that would be illegal.

JC 10:38 am 03 Jul 14

JC said :

urchin said :

that’s how PI’s make money, right? by losing as much money as they can? sweet, sweet tax write-offs…

The stupid ones maybe. The reality is the return on a tax write off is only as good as the tax rate you are paying, so at present 45%. So makes no sense just to loose money just to write it off. Much better to actually make some and pay tax on it than to loose money.

Besides making money on property is more about the capital gain than day to day rent.

Before someone jumps on me, I missed the word maximum when talking about the tax rate. So should read, “so at present a maximum of 45%”

JC 10:35 am 03 Jul 14

urchin said :

that’s how PI’s make money, right? by losing as much money as they can? sweet, sweet tax write-offs…

The stupid ones maybe. The reality is the return on a tax write off is only as good as the tax rate you are paying, so at present 45%. So makes no sense just to loose money just to write it off. Much better to actually make some and pay tax on it than to loose money.

Besides making money on property is more about the capital gain than day to day rent.

VYBerlinaV8_is_back 8:17 am 03 Jul 14

urchin said :

VYBerlinaV8_is_back said :

urchin said :

VYBerlinaV8_is_back said :

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.

But you don’t get to just raise rent however much you want. As you are no doubt aware, Landlords are only able to raise rent 1.2 times CPI increase for housing over the relevant period unless substantial works have been done to improve the value of the property.

Looking at calculator on the ACT tenant’s union website, if a contract had been signed or rent last raised one year ago for $500/week, you would be able to raise that rent to a whopping… $502.33

With rents falling in most parts of canberra these days landlords should be happy to keep people paying the same rent. if they scare tenants away and have to readvertise their property will likely sit vacant for some time before being rented out for less.

I’ve noticed that times when rules change are a great opportunity to do some cosmetic renovations. Did you know that you can evict a tenant (with appropriate notice) to renovate? When the property comes back on the rental market, the rent is reset to market rate (for a renovated property).

The Tenant’s Union does some good things, but don’t underestimate the ability of resourceful people to get what they want.

Of course, some care is needed to balance the commercial reality, but please don’t think for a moment that tenants have the upper hand here.

sure you can kick a long term, stable tenant out, let the apartment sit vacant for a month or so while you “renovate” put it back on the market (paying more agent’s fees) let it sit empty for another month and then maybe rent it out for the same or less than you were renting it before.

that’s how PI’s make money, right? by losing as much money as they can? sweet, sweet tax write-offs…

You obviously aren’t a property investor.

Stable, long term tenants are generally paying below market rent, which is why a small increase can usually be absorbed. Also, if it takes you a month to do a cosmetic renovation then you really shouldn’t be in the game. I once turned around a recarpet/paint/fixup in 4 days, doing none of the work myself.

milkman 6:51 am 03 Jul 14

Queen_of_the_Bun said :

Pandy said :

pierce said :

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.

With jobs going in the PS making it harder to stay in the ACT, is stoopid IMHO.

Have you heard that trades are actually turning up before the allocated time, because of the dearth of public service jobs?

Have you heard how managers of employment companies are going back to the PS as APS 6s so as to place dinner on the table?

Obviously not Mr Barr.

No, as someone who is renovating a property at the moment, I have certainly not heard about tradies turning up early or even on time. Please provide supporting information.

I can assure readers tradies are definintely not turning up on time, finishing jobs when they said they would or cleaning up the mess. Just had some work done at my place, and the trades were as slack as ever.

urchin 9:50 pm 02 Jul 14

VYBerlinaV8_is_back said :

urchin said :

VYBerlinaV8_is_back said :

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.

But you don’t get to just raise rent however much you want. As you are no doubt aware, Landlords are only able to raise rent 1.2 times CPI increase for housing over the relevant period unless substantial works have been done to improve the value of the property.

Looking at calculator on the ACT tenant’s union website, if a contract had been signed or rent last raised one year ago for $500/week, you would be able to raise that rent to a whopping… $502.33

With rents falling in most parts of canberra these days landlords should be happy to keep people paying the same rent. if they scare tenants away and have to readvertise their property will likely sit vacant for some time before being rented out for less.

I’ve noticed that times when rules change are a great opportunity to do some cosmetic renovations. Did you know that you can evict a tenant (with appropriate notice) to renovate? When the property comes back on the rental market, the rent is reset to market rate (for a renovated property).

The Tenant’s Union does some good things, but don’t underestimate the ability of resourceful people to get what they want.

Of course, some care is needed to balance the commercial reality, but please don’t think for a moment that tenants have the upper hand here.

sure you can kick a long term, stable tenant out, let the apartment sit vacant for a month or so while you “renovate” put it back on the market (paying more agent’s fees) let it sit empty for another month and then maybe rent it out for the same or less than you were renting it before.

that’s how PI’s make money, right? by losing as much money as they can? sweet, sweet tax write-offs…

Queen_of_the_Bun 8:37 pm 02 Jul 14

Pandy said :

pierce said :

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.

With jobs going in the PS making it harder to stay in the ACT, is stoopid IMHO.

Have you heard that trades are actually turning up before the allocated time, because of the dearth of public service jobs?

Have you heard how managers of employment companies are going back to the PS as APS 6s so as to place dinner on the table?

Obviously not Mr Barr.

No, as someone who is renovating a property at the moment, I have certainly not heard about tradies turning up early or even on time. Please provide supporting information.

Sandman 7:50 pm 02 Jul 14

Ghettosmurf87 said :

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.

Not really. A landlord will try to get the maximum possible no matter what. All this does is cut into their profits. The market dictates the rental prices. I know of places that have been empty for 12 months because the owners aren’t willing to drop their price to a realistic level. They’re too used to the good old days of maximum returns and can’t handle the realistic levels.

JC 5:30 pm 02 Jul 14

I have a question for Mr Smyth. What unwanted capital works program has the government maxed out the credit card on? Surely you are not talking about light rail are you? If so then your being a tad melodramatic as hardly anything has been spent on it yet, certainly not enough to max out the credit card anyway.

Also your party does have a history of not spending on much needed infrastructure, leaving it to Labor and then complaining about it. So pull ya head in and do something constructive rather than just whinge and whine in the hope people may vote for your lot.

For a start please tell us how you will continue to run this town if you are in power. Where are you going to get the money from? You can only cut so much from the budget, which means somewhere along the lines people need to pay more, in which case how exactly do you propose to raise the money required?

watto23 4:23 pm 02 Jul 14

rommeldog56 said :

Ultimately, decisions such as this WILL affect renters. But it may take a while. Scenario:

Landlords/investors ROI is reduced.

Maybe they can get getter ROI elsewhere. They sell their rental property in ACT.

Less rental stock = increased rents. Though with the surplus of units on the market now, this will probably take a while to flow through.

Hate them or love them, while people want/have to rent, landlords are a necessity.

IMHO, lower rents are good but history shown that this is a cycle and higher rents will return – thats when this new tax/revenue raising measure from the ACT Gov’t WILL bite renters. So, when that happens, where will that leave the homeless, aged, pensioners, disabled, low income earners and other disadvantaged groups ?

There will always be winners and losers, but if rental properties are put up for sale the more property for sale on the market, usually the lower the selling price will be. Some renters may be able to afford a place to buy. Its all political spin. Yes it would be nice for the govt to not charge the fee, but its not all doom and gloom, if its as bad as what people think it is to protect their own self interests then maybe it will actually be good for many others.

However as someone who has a fairly well paid off mortgage, a drop in housing values would affect me, If I wanted to sell.

VYBerlinaV8_is_back 9:25 am 02 Jul 14

arescarti42 said :

m_ratt said :

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.

Exactly, rents are determined by market supply and demand, not by the costs experienced by landlords.

Yield is totally irrelevant for a majority of landlords anyway, as they’re speculating on capital gains to put them in the black.

There’s absolutely no chance of the additional land tax being passed on to renters.

VYBerlinaV8_is_back said :

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.

Unless you have a very unique property or a very uninformed tenant, your property will be sitting vacant for months in this market.

And yet, curiously, two of my last four rental renewals had rent increases…

VYBerlinaV8_is_back 9:23 am 02 Jul 14

urchin said :

VYBerlinaV8_is_back said :

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.

But you don’t get to just raise rent however much you want. As you are no doubt aware, Landlords are only able to raise rent 1.2 times CPI increase for housing over the relevant period unless substantial works have been done to improve the value of the property.

Looking at calculator on the ACT tenant’s union website, if a contract had been signed or rent last raised one year ago for $500/week, you would be able to raise that rent to a whopping… $502.33

With rents falling in most parts of canberra these days landlords should be happy to keep people paying the same rent. if they scare tenants away and have to readvertise their property will likely sit vacant for some time before being rented out for less.

I’ve noticed that times when rules change are a great opportunity to do some cosmetic renovations. Did you know that you can evict a tenant (with appropriate notice) to renovate? When the property comes back on the rental market, the rent is reset to market rate (for a renovated property).

The Tenant’s Union does some good things, but don’t underestimate the ability of resourceful people to get what they want.

Of course, some care is needed to balance the commercial reality, but please don’t think for a moment that tenants have the upper hand here.

dungfungus 8:25 am 02 Jul 14

Andrew Barr advertises his ignorance in today’s Canberra Times by stating “investors can claim the $900 as a tax deduction”.
That may be so in some cases but a lot of investment properties are now owned by SMSFs in pension mode and they don’t pay tax.
There is nothing more useless than a tax deduction when there is no tax to pay.
I can already see our socialists (like Andrew Leigh and Richard Denniss) rubbing their hands with glee.

davo101 8:07 am 02 Jul 14

Mr Barr’s response is here.

rommeldog56 7:00 am 02 Jul 14

Ultimately, decisions such as this WILL affect renters. But it may take a while. Scenario:

Landlords/investors ROI is reduced. Maybe they can get getter ROI elsewhere. They sell their rental property in ACT. Less rental stock = increased rents. Though with the surplus of units on the market now, this will probably take a while to flow through.

Hate them or love them, while people want/have to rent, landlords are a necessity.

IMHO, lower rents are good but history shown that this is a cycle and higher rents will return – thats when this new tax/revenue raising measure from the ACT Gov’t WILL bite renters. So, when that happens, where will that leave the homeless, aged, pensioners, disabled, low income earners and other disadvantaged groups ?

Related Articles

CBR Tweets

Sign up to our newsletter

Top
Copyright © 2018 Riot ACT Holdings Pty Ltd. All rights reserved.
the-riotact.com | aboutregional.com.au | b2bmagazine.com.au | thisiscanberra.com

Search across the site