Land tax squeeze may hit business

Originally written by JAN LEISHMAN

LOCAL businesses and owners of investment properties could be facing huge land tax hikes unless the issue is addressed in the May budget.

Nationals leader, Peter Ryan, has called on the Treasurer, John Brumby, to revisit land tax in the lead-up to the budget.

Hamilton Regional Business Association also holds concerns about the effect of land tax on Hamilton businesses and is seeking comments about land tax from business people and others in order to take further action.

Association secretary, Tim Sanders, described land tax as “insidious”. He said it didn’t relate to business profitability or performance.

“Of major concern to HRBA is the fact that the time lag between the valuations in 2004, and the assessment (in 2006), means that businesses have not yet felt the full force of the land tax squeeze,” he said.

Mr Sanders said a number of concerns over the imposition of land tax on businesses and investment property owners, had been raised at a recent HRBA breakfast meeting.

The meeting was addressed by land tax expert, Jonathon Storer, who described the structure of the tax and its effects on local businesses.

Land tax is a state-imposed tax on non-residential land, where the unimproved value is above $175,000. For people owning more than one business or property, the tax is applied to the land cumulatively.

One of the problems with estimating the amount of land tax owed, is its structure, which varies according to the value of the land. For example, land valued from $175,000-$199,000 would be taxed a flat $175, plus a cost per dollar over $175,000. There are eight different land tax brackets which apply depending on the total value of the land in question.

Tax will hit

“Regardless of how profitable your business is, you will be clobbered, depending on where you are located,” Mr Sanders said.

“One of the issues is that there is no hardship exemption.”

He said land tax would also affect people who were left property in a person’s estate.

“They would have the choice of paying land tax (if they retain the property) or capital gains tax (if they sell it),” he said.

Mr Ryan said country shires were concerned about the economic impact of increased land tax.

In East Gippsland the council was concerned not only that businesses may have to close, but that new business may not invest in regional areas.

“At a time when rural and regional councils are going out of their way to attract new investment to create jobs, the impact of land tax is becoming a disincentive for the business community,” he said.

“One of the competitive advantages that rural councils used to boast, was cheaper operating costs, but as land values have escalated throughout the state, more businesses are being slugged with increased land tax bills.”

Call for review

He called on the Treasurer to review land tax provisions before handing down the May State Budget.

“The Government can afford to provide land tax relief and it must take action now to protect jobs and encourage economic growth in rural and regional Victoria,” he said.

Mr Sanders said land tax was a source of revenue for the State Government. He said it was clear that it would remain on the political agenda as part of the GST trade-off between the Federal Government and the state.

“With no relaxation in land tax likely to occur for some time to come, HRBA is keen for local business people to be aware of the potential costs to their businesses which land tax imposes,” he said.

“We’d like them to talk to their accountant or adviser to learn what impact this tax will have on their business.”

Among changes suggested to land tax by Real Estate Institute of Victoria chief executive, Enzo Raimonda, are easing the top marginal land tax and a complete overhaul of the eight land tax brackets. Other changes could include rating properties on an individual basis rather than the combined annual value of land owned and capping annual increases.

In December last year, figures released by Land Taxation revealed that Southern Grampians residents who were eligible for land tax would be facing a 60 per cent increase in 2005.

This would affect not only businesses, but those with investment homes in high valuation areas, such as Port Fairy.

Land tax bills are not expected to be sent out until mid-2005.

Mr Sanders said HRBA was planning further action on land tax and was looking for comments and concerns raised by local businesses and community leaders. Those interested in forwarding comments, should contact Mr Sanders on 5572 2822.