Land Tax Forum

Attention Tim McIntyre, Editor

Hi Tim,

The proposed State Land Tax (SLT) formula to be introduced in 2021 State Budget I believe will impact family homes on freehold land especially, in established residential areas. This is the fourth attempt by the current NSW Government / Treasury, to impose a catchall SLT. It only targets land that is now SLT-exempt.

The Carr Governments

Imposed SLT selectively on family homes (premium property land tax} it collapsed, however, soon imposed SLT on every commercial and private funded rental housing in NSW. (Tax-free threshold was removed)

That effort lasted just 12 months and Carr and Egan resigned soon after its implementation.

Attempts to impose a catchall SLT

Barry O’Farrell	Proposed a catchall levy on all land. Did not proceed
Mike Baird	Proposed 0.7% SLT on all land. Did not proceed. (Mike Baird was provided data that would see him defeated in Manly)
Gladys Berejiklian	Proposed catchall levy on land to fund Emergency Services. Postponed.
Dominic Perrottet	Proposes, initially, a formula to avoid Stamp Duty if(!) the purchaser agrees that SLT-exempt land becomes perennially liable to SLT.

None of the politicians above advised homeowners that, unlike business land, the Family Homes cannot deduct costs against Federal Tax liability. For example, SLT, Council, Water, Energy, Repairs/Maintenance, interest, insurance, GST etc

None respond to correspondence regarding SLT’s impact on rental housing and small business.

Dominic Perrottet’s NSW Treasury formula only applies to land now not liable to SLT such as the family home, farms, nursing homes, boarding houses and so on. They are all proposed to become perennially liable for SLT when the first purchaser elects to avoid stamp duty.

Many homeowners may not be aware SLT is an annual tax, annually adjusted to annual Site Value adjustments and that it taxes site value (not UCV). SLT prime impact is upon freehold land enforced by severe recovery options.

Family Homes on freehold land in established residential areas are the formula targets, such as those in Council areas The Courier Newspapers publish in. 

The formula seeks to fly under homeowners’ radar while handing a tax windfall to property developers, dealers, renovators, shor-term owners, spec builders. All of those groups avoid stamp duty but, by agreeing, exempt land use becomes, perennially liable for SLT.

First home buyers can be assisted by State by waiving stamp duty instead of seeking to SLT existing family homes etc. Already, NSW taxation, charges, and so on  are at usary levels without going after family homes and farmers.

SLT has decimated privatel- funded exclusively rental housing, especially in established residential areas, yet Governments invest billions in subsidized rental housing because of rental crises.

State revenue on land sales in 2020

The table below shows the massive sums collected in SLT and SD on land sales. It includes data from one year only from the Randwick, Waverley, Woollahra and City of Sydney Council areas.

	SLT on private rental housing	SLT on business lands	SD on land sales only	Total
Randwick	$86,000,000	$21,000,000	$225,000,000	$332,000,000
Waverley	$73,000,000	$23,000,000	$125,000,000	$221,000,000
Woollahra	$84,000,000	$20,000,000	$285,000,000	$389,000,000
Sydney	$107,000,000	$640,000,000	$788,000,000	$1,535,000,000

All rounded total: $2,477,000,000.

Note that this figure is conservative, and the does data does not include revenues received after 4 November 2020. Data was provided by NSW Treasury.

Regards,
Mike Danzey

Dear Mr Perrottette,

Regarding your proposal that a wide-based State Land Tax (SLT) replace Stamp Duty (SD)

We seek information how the proposed wide-based SLT will be imposed in
NSW.

This is a monumental change to NSW land taxation that requires
explanation. The information requested
would be available accordingly, and we would appreciate receiving the
information ASAP.

Preamble

This is fourth time the current State Liberal/National Government has
proposed a wide-based SLT. For example:

• Mike Baird as Treasurer proposed a 0.7% wide based SLT.
• Barry O’Farrell as Premier proposed a catchall levy and nominated the
  initial level of tax
• Gladys Berejiklian as Premier proposed a catchall levy to fund emergency
  services.

Additionally, the previous Carr/Egan State Labor government:

• Imposed a premium property tax that was outrageously selective and
  failed
• Imposed a catchall SLT on all NSW business property by removing the
  tax-free threshold. This lasted just one year.

As stated, a wide-based SLT is a monumental taxation change requiring a
full explanation from any Government proposing it. Accordingly, initially
we seek the following information:

1. Will SLT be imposed on all family homes – Farms etc?
2. What is the projected initial Tax Rate of the proposed SLT.
3. Will SLT tax rate be common to all land uses?
4. Will land values be imposed using “Valuation of Land Act 1916”
   methodology?
5. What will be Re – valuation circle . Annual like current SLT regime?
6. OR, Will a universal levy be imposed on “all land use”?

SD on land sales in Council areas 18-19 to November. Total State SD $7
Billion [ conservative]
SLT raised in Sydney council areas in 2020. SLT $6 billion + [
conservative]
Example. SD 18/19. and SLT 2020 raised small number of Sydney Council area

Council Area	Stamp Duty	Land Tax	Number liable for Land Tax
Ryde Council	$150,000,000	$116,00,000	8954
Willoughby	$130.000.000	$97,000,000	6225
Woollahra	$280.000,000	$105,000,000	6656
Waverley	$125,000,000	$100,000,000	9112.
Inner West	$220,000,000	$215,000,000	18,746
Ku-ring-gai	$235,000.000	$ 66,500,000	5244
Northern Beaches	$410,000,000	$178,000,000	5,045.
North Sydney	$310,000,000	$102,000,000	8399

SLT was reintroduced in 1955. All subsequent NSW governments prodigiously
expanded and increased SLT, especially in the years since 1980—90s,
undermining the fiscal viability of numerous exclusively rental housing
apartment blocks if privately owned or funded. SLT also adversely affected
small business need of a freehold site. A wide-based SLT has the potential
to destabilise Family Homes on freehold sites.

SLT is a planning weapon designed to fiscally erode existing use of
freehold land. We need to debate if SLT should be a Federal tax making it
equitable or if it should be abolished.

Yours faithfully,
C.J. (Mike) Danzey, Qualified and Certified Property Valuer

Dear Premier,

Subject: Elimination or substantial reduction of State Land Tax to encourage Social and Rental Housing:

Client 1290399. State Land Tax (SLT) 2020 has been increased to $45,200.

The current SLT on the above property known as 36 Alfred St, Bronte, 2024 has increased by an amount equal to $100p/w since the SLT assessment for 2018. This increase has virtually collapsed the fiscal viability of the existing use of the property as “Exclusively Rental Residential Apartment Building” (ERAB), if privately owned and funded. This is one of many examples of ERAB providing secure affordable housing being fiscally subverted by SLT.

Accordingly, I ask you and your advisers to reflect upon and respond to the comments and questions I have set out below:

1. Why is SLT used to collapse fiscal viability of property on land when the existing use is ERAB?

   If use as “exclusively rental housing” is effectively removed while Politicians and their advisers and social commentators state that “a rental housing crisis exists” in many council areas in the State, how can you and your government remain silent on the impact of SLT in its present form, undermining ERAB fiscal viability of those relevant properties? It is at best contradictory and in reality, makes no sense.

2. Previous submissions made on this topic have in the past received the same drafted formula reply from the Treasury which avoids the essential issue — a tactic to control and evade the need for prompt action on this important issue.

   “State Land Tax is needed to fund schools, roads and hospitals”

   While the need for the above is correct and fully recognised, a broad brush approach to the imposition of SLT does not solve the real problem. Hundreds of millions of dollars of funding is made available to subsidise rental housing and, in includes the imposition of taxation on some properties which render them unaffordable for renters. This position is further impacted by the addition of the Affordable Housing Tax on new developments and Strata Approvals. Affordable Housing is of course supported when the need exists. However, the following question is never directly answered:

   “How is a rental housing crisis ameliorated by a SLT agenda that, impacts fiscal viability of ERAB property”?

3. Private/social rental housing became a political football in NSW as early as the 1928 elections and remains so to the present time. Why does this issue continue to exist in its present form?

Important observations and queries:

• ERAB requires a Freehold site — SLT design and application target and impacts such sites. VG imposed land tax valuations — ignore existing use as ERAB of any freehold land. What is the justification for this?

• VG land tax valuations of ERAB sites applies as comparable, land sales not liable to SLT. Why does this anomaly persist?

• Unlike commercial tenants, residential tenants cannot claim rental payments as Federal tax deduction (apart from any small areas if, used as a home office).

• Politicians and others, in many council areas, constantly advise of a rental housing crisis in many parts of New South Wales.

• SLT impacts ERAB significantly in those council areas which are identified by many politicians and others advise, have an affordable rental crisis, and indeed a general renting crisis.

• The way the SLT is currently designed and imposed destabilises ERAB fiscal viability of property and, in turn, exacerbates the rental and affordable renting housing crisis. Why is it permitted to continue in such form when it has such an adverse impact on this important issue?

• ERAB use property is restricted in its intended purpose of providing affordable stable rental housing as it is currently targeted by SLT. That position should be remedied as soon as practicable.

• The current design and imposition of SLT is machiavellian at best and discourages any constructive focus on it and awareness of it by Tenants, commentators, analysts and the media. Treasury responses to date simply obfuscate the real issue and adverse impact of the current SLT structure.

In NSW, the following recent attempts have been made to expand SLT:

Changes to SLT that was imposed:

• Carr Governments — Premium Property SLT targeted homes in Sydney inner council areas. Catchall SLT on rental housing and small business. Both taxes collapsed as Bob Carr resigned.

Changes to SLT that was Proposed:

• Mike Baird as Treasurer proposed a catchall SLT at 0.7%. A major transfer of SLT to residential land, especially on freehold homes. Mike Baird was sent a confidential report showing impact on freehold homes and his likely defeat in Manly. He subsequently asked the report be sent to Treasury. Catchall SLT not proceeded.

• Subsequent proposals called SLT a Levy.

Concerns:

• Unfunded State Superannuation of $49 billion which is proposed to be funded by 2030, may be a strong factor driving Treasury’s persistent efforts to impose/expand SLT to a ‘catch-all’ Land Tax in NSW. This is proposed as Treasury must be aware that a ‘catch-all’ state Land Tax will be inequitable and an attack on the family home — especially homes occupying freehold land. SLT now attacks tenants homes provided by existing ERAB.

• Rental Housing became a political issue during the 1928 NSW Election and remains a ‘political football’ which has constant support of the left-wing faction of politics. NSW continued to impose a momentous subsidised rental housing lockdown from 1946 to approximately 1990 (which was introduced by the Federal Government as a war-time precaution). This was a mass enforced rental and occupation lockdown which was totally funded by existing private rental housing providers. Numerous ERABs were fiscally impacted by this lockdown, where it became a post-war political tool.

• Currently, a several decades later, existing ERABs are being impacted by State Land Tax. Is there a pattern emerging here? The consequences of this rental and occupation lockdown left many suburban areas of Sydney (such as Paddington, Newtown, Balmain etc.) labelled as slum areas. As reflected by the idiom first said by Ben Chifley: ‘To get and remain elected, you create policies that touch the hip-pocket nerve’.

Conclusion

I ask you respond in detail to the questions I have set out in this letter.

“How is a rental housing crisis ameliorated by a SLT agenda that, impacts fiscal viability of ERAB property”?

I request that your government change the existing SLT policy as it clearly is subverting ERAB. This is especially relevant in the Council areas where your Government and others (e.g. social housing lobbies) are constantly emphasising the existence of a rental housing crisis whilst remaining silent about SLT.

This consequently undermines the fiscal viability of existing ERAB. This is occurring while taxpayers are called upon to fund more taxpayer subsidised housing. In my opinion, this is significantly influenced by the concern that the gentrification of many council areas is altering the political allegiances of the residents.

Yours Faithfully,

C.J. (Mike) Danzey.
Qualified and Certified Real Estate Valuer
Yarran Investments P/L

The affordable housing and rental issues are contaminated by political hypocrisy and industry propaganda agendas, chanting in unison concern about “rental housing crises”. Media reports these outpourings, producing simplistic fake news. Politicians expressing ‘concern’ about affordable rental housing reaches back to the 1928 NSW Election. Since then we have been overdosed with political hypocrisy and generalization about rental housing affordability. It reflects the idiom “To get elected and remain elected, have policies that touch the hip-pocket nerve”.

NSW annual State Land Tax (SLT) for 2017 attests the political hypocrisy and agenda-driven concerns of industry participants’ about NSW affordable rental housing, aware, SLT is designed target private owned exclusively rental apartment blocks need of a Freehold site.

Examples

Annual SLT imposed on rental housing for 2017, reflects the political hypocracy

	Number of properties	SLT imposed
Sydney Statistical Area	177,897	$1,100,000,000
Regional NSW	41,976	$275,574,000
Totals	219,873	$1,375,574,000

SLT imposed on rental housing in small handful of Sydney Council areas

• Woollahra: $67.5 million
• Leichhardt: $32.1 million
• Canada Bay: $34.1 million
• Auburn: $20 million
• Waverley: $62.5 million
• Marrickville: $37 million
• Canterbury: $33.5 million
• Randwick: $67.5 million
• Ashfield: $15.1 million
• Hunters Hill: $7 million
• Ku-Ring-Gai: $32 million
• Botany: $15 million
• Burwood: $12.5 million
• Blacktown: $45 million
• Manly: $20.2 million
• Willoughby: $29 million

NSW SLT knows no bounds taxing and targeting regional rental housing. For example:

• Albury: $1.2 million
• Coffs Harbour: $4.1 million
• Cessnock $1.7 million
• Wagga: 1.7 million
• Wingecarribee: $3.8 million
• Tamworth: $1.0 million
• Tweed: $7.7 million
• Lake Macquarie: $9.3 million
• Newcastle: $44.3 million
• Dubbo: $0.9 million

Etcetera.

Hypocrisy! Politicians’ rare unison of silence about a SLT designed to target and impact viability of privately-owned rental housing, especially in council areas said to have a rental housing crises. This, while The Property Council lobbies for a catchall SLT, exposing every suburban family home.