“It was so outrageous we assumed it would never pass,” said a comment forwarded to Antonia Mercorella, CEO of the Real Estate Institute of Queensland (REIQ).
“I think a number of us were scratching their heads wondering who was behind this particular reform because I think it really takes taxation to a new level, and that’s concerning” , she told The Epoch Times.
Mercorella is referring to the Queensland government’s recent decision to extend liability for property tax, one of four new taxes introduced in the latest Australian state budget in what is seen as an attempt to stop rapidly growing debt and utility costs.
Property tax in Australia is normally paid by investors – above a certain threshold – on residential and commercial properties to the relevant state or territory government.
In turn, average investors may seek to diversify their portfolio and buy properties across the country in different jurisdictions, taking into account different thresholds, in an effort to reduce their tax burden.
However, in an Australian first, the Queensland government will charge a property tax based on the total value of an individual’s assets nationally – a move now closely watched by other state governments.
Mercorella warned that implementation would not be easy and questioned the logic behind the decision.
“What is the property tax for? How can you justify basing the property tax value on a property that is not within your borders? It’s beyond comprehension – it’s actually illogical,” she said.
A bad deal for tenants
However, Queensland Treasurer Cameron Dick defined the new policy as one in which the government prevents investors from preventing young families from entering the property market.
“Young families in places like Logan and Ipswich are facing unfair competition from Sydney-based speculators who are flipping properties across the country at a breakneck pace,” he said in a December statement. 2021. “We will close this loophole while ensuring there are no changes to property taxation for Queenslanders who own land wholly within our state.”
But, Mercorella thinks that’s an oversimplification of the matter.
“I think it’s an overly simplistic argument to say that if you took away the investors, the tenants could afford to buy. I think it’s not recognizing that there are people in our community who choose and would prefer to rent,” she said.
Currently, the majority of rental properties (36% of Queenslanders’ rents) are provided by regular investors, while social housing, supported by the state government, accounts for just 3% of supply.
In addition, investors contribute significantly to government coffers, including higher stamp duty and property taxes (at the state level), council rates (at the council level), and a tax on capital gains on sale (federal).
“It’s the cumulative effect of those things that we’re concerned about, there’s more money you’re shelling out, plus mortgage payments and other rates and bills associated with owning a property,” said Mercorella. “The reality is that additional costs incurred by a landlord will inevitably be passed on to tenants.”
This will increase the pressure on potential tenants who are already struggling to find housing.
Greater Brisbane, Queensland’s capital, recorded a vacancy rate of just 0.7% (as opposed to a healthy vacancy rate of 2.6-3.5%), a situation that driving up rental prices across the city, according to REIQ’s Residential Vacancy Report for June.
The situation has been taken to extremes during the pandemic after lockdown policies sparked massive interstate migration away from the most populous states of New South Wales and Victoria, with Queensland being the main beneficiary receiving around 80 056 net migrants between 2020 and 2021. About 44,705 came from New South Wales and 23,299 came from Victoria, according to the Australian Bureau of Statistics.
The renewed interest has seen many landlords decide to sell their property, which has had the following consequences: First, the emergence of a new pool of cashed-in tenants who have just sold their property; second, another group of existing tenants forced to vacate their property because it had been sold; and finally, pressure on current tenants to pay more and match rising rental prices.
Lack of detail suggests difficult future deployment
Recent budget estimates hearings suggest the state Labor government still has a lot of work to do before it can implement the tax.
Leon Allen, Deputy Under Treasurer of Queensland, acknowledged that there were no existing arrangements with other jurisdictions regarding the sharing of data on properties a person might own. Furthermore, he added that the success of the policy would “heavily” depend on the amount of information that can be obtained – all states and territories maintain their own land records independently of each other.
“It depends on us using available information rather than direct feeds from other state revenue offices. Our estimates [on the revenue to be gained from the expanded land tax] are very tentative at this stage,” he told the Committee on July 26.
Allen was also unable to immediately answer questions about what effect the policy might have on the state’s housing affordability crisis and whether the House Committee on Taxation was aware of the incident. ‘initiative.
State Treasurer Dick said he believed the government would only need to hire nine staff to get the program started, also noting that it would have access to “alternative mechanisms” and ” third-party providers” to find out what properties an individual owns.
In response, Mercorella wondered if it was really worth it financially.
“I would have thought that the cost of administering, policing and enforcing this policy would likely outweigh any actual financial gain.”
A government that spends beyond its means
The expanded property tax is one of four new taxes introduced in Queensland’s latest budget, including a higher gambling tax, higher payroll tax for large corporations (a ‘mental health tax’ ), hikes in state mining royalties – the latter triggering a direct response from the Japanese ambassador. In addition to this, the government has increased penalties for speeding, seat belt and red light violations.
“That’s what happens when government spends beyond its means, people pay, and they pay, and they pay,” Campbell Newman, Queensland’s former Liberal-National premier, told The Epoch. Times. “They’ve thrown caution to the wind, and they just don’t have any financial discipline.”
“The government has massively increased the administrative side of the civil service and yet failed to deliver better frontline services. As a result, costs have skyrocketed and they are desperate to raise funds. That’s why they attack investors everyday.
Current debt levels are expected to reach $127.4 billion (US$87.8 billion) by 2024-25.
Prime Minister Annastacia Palaszczuk has come under fire over civil service pay rises, as well as her government’s decision to spend $198.5 million on building and renting a COVID-19 quarantine camp in 1000 beds in Wellcamp, 144 kilometers west of Brisbane, and to close it just six months after opening. Only 700 people stayed at the facility during that time.
State Opposition Leader David Crisafulli said the costs amounted to around $325,000 per guest.
“The state government could have purchased a one-bedroom unit for each guest,” he said.
Newman also said high coal and gas prices helped the budget bottom line, essentially masking the need for fiscal discipline. But at some point the Queensland government will have to limit its spending, which could be difficult in the run-up to the 2032 Olympics.
“Rather than take advantage of high coal and gas prices to get things under control, they just kept spending – when the commodity cycle turns, they’ll be in huge trouble,” he said.
“As tranches of debt mature, they will need to be refinanced,” he added. “Interest rates have increased dramatically, which means that instead of investing money in police, ambulances and hospitals, they are going to pay interest to foreign financiers.”