As part of the state budget, the Barnett government has increased land tax in Western Australia by 10% across the board amid slowing revenue growth.
The Property Council of Australia has warned against the bid to offset revenue decline, as the WA property market softens, along with its labour market.
The Property Council has advised that the government implement a plan to encourage a new wave of investment-led growth instead, while meeting unprecedented demand for public services and infrastructure.
“The government’s own advisory body, the Economic Regulatory Authority, recently said the state’s land tax system is inefficient and has recommended that Treasury conducts a full scale review of all taxes, including land tax and stamp duty,” said Joe Lenzo, executive director of the Property Council of Australia (WA division).
The Property Council’s key recommendations for the state budget included conducting a review of the land tax system to distribute the tax burden more equitably; curbing the growth of public expenditure by increasing private sector service delivery; establishing an independent body to coordinate the delivery of state-wide infrastructure, and recycling public assets to fund much needed infrastructure.
The increase in land taxes is forecast to raise an additional $72 million in 2014-15 and $334 million over the four years to 2017-18. Land tax is expected to bring in a total of $752 million for the state this year, and is estimated to bring $1.01 billion in revenue in 2017-18.
In WA, land tax is payable on properties with unimproved land values over $300,000. The government believe that the majority of property owners will be unaffected by the land tax changes due to a range of exemptions. Approximately 80% of those affected, who hold land with an unimproved value of up to $1 million, will apparently experience a tax increase of up to $70 per year.
West Australian property owners who are ineligible for exemptions will pay annual land tax ranging from $110 for properties with an unimproved land value of $400,000 to $263,000 for unimproved land value of $15 million.
“The government… needs to think beyond tax increases to solve the mounting deficit. Innovative strategies are required that incorporate more private sector involvement in approvals processes, such as full private certification of building permit applications and the introduction of private certification of planning approvals,” said Lenzo.
“In a constrained budget, the government needs to get better ‘value for money’ for its infrastructure spending. The best way to do this is through an independent body that can advise, prioritise and deliver infrastructure, and that can be held accountable.”
A significant portion of WA’s existing capital is tied up in under-utilised land and property, and the Property Council believes that asset sales – supported by bold, strategic asset investments – will drive economic and productivity growth.
“Short-term solutions to the state’s budget problems, like raising the rate of land tax, don’t work. We saw this last year when land tax was increased by 12.5% and the state’s budget is still in trouble. The government needs to implement a plan that encourages growth in the broader economy, starting with the property sector,” said Lenzo.