Napthine government won't cap ballooning land tax bills

The state government has ruled out a reduction or cap on land tax despite some CBD landlords being hit with bill increases of up to 1400 per cent in a single year.

The state government has ruled out a reduction or cap on land tax despite some CBD landlords being hit with bill increases of up to 1400 per cent in a single year.

The decision comes as the new Napthine government fights to reverse a $349 million budget deficit and the Commonwealth plans to slash the state's share of GST revenue by $200 million.

"No work is being undertaken on capping annual land tax increases," Treasurer Michael O'Brien said.

BusinessDay reported last week that ballooning land values have seen land tax bills soar by 80 per cent to 250 per cent for some retail properties in the CBD and Southbank, according to a survey by property firm Kliger Wood.

The Treasurer advised that those who do not believe their land valuation is appropriate are entitled to lodge an objection with the State Revenue Office.

But critics say the core problem is not a rise in land values but the rate the land tax is charged.

"You can't have one portion of your expenses just blow-out," said Kliger Wood director Barry Novy. "If you don't cap it or have some control over it then it just becomes vexatious and it can create a major financial problem."

The rates have been described as "usurious" by one CBD building owner who has seen his land tax bill increase 150 per cent this year.

"CPI [Consumer Price Index] is running at 2.2 per cent and they've got the gall to charge these kinds of rises? It's obscene," he said. "Imagine if a business tried to do that. But because they are the government, they can get away with it."

The government estimates the land tax will bring in $1.58 billion in 2012-13. It represents an estimated 13.3 per cent revenue increase on the last financial year.

"Despite this, growth in land tax revenue over the forward estimates is still expected to be below the long term average," the 2012-13 budget update paper warns.

In 2006, the Brumby government introduced a cap on land tax limiting the rise to 50per cent of the previous year's bill, but it was scrapped two years later to boost revenue.

Property Council of Australia executive director Jennifer Cunich said developing a long-term tax strategy should be a government priority, which should include a "fairer and flatter" land tax structure.

But industry experts warn that soaring bills will attack and erode the capital values of city properties.

"If you've got land tax that's gone from $17,000 to $90,000 you're hardly going to be able to increase the rent in the same multiple," said Pat Barnes, director at property firm Allard Shelton.

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