Business SA ‘Delay Land Tax Bill until Revaluation is complete’

By Business SA Chief Executive Martin Haese 

Published in The Advertiser SA Business Journal on Tuesday 8 October 2019

The State Government has recently invited comment on their draft Bill to make changes to the land tax system in South Australia. These changes are highly topical and have often been raised in the media. Whether it’s the continued ire of property owners with multiple investments, mum and dad investors, tenants or indeed those who stand to benefit, land tax affects so many people.

The reality remains that Business SA has been overwhelmed with feedback from many small, medium and large businesses in recent months, most notably from tenants worried about price increases being passed on. While the public may be hearing about land tax changes only impacting Sally with her three properties in trusts, as opposed to Sarah holding them individually, the reality is not that simple. 

With Business SA’s members forced to manage and minimise costs in a competitive environment, particularly when competing in interstate and overseas markets, many business owners have legitimately used tax-effective legal structures to hold property based on sound accounting and legal advice. Using multiple legal structures also extends beyond land tax considerations, as it often helps to protect assets and enable succession planning within families with multiple siblings. This doesn’t mean they’re using loopholes. Instead, they are often legitimately protecting assets, particularly when business relationships are formed with non-family members. 

While owning property is not always a prerequisite for growing a business, many owners purchase property for other reasons, including security of tenure. For example, a manufacturing business might own property so they can invest in an expensive, tailored factory, while for a retailer it secures a prime location. Property is also commonly used as collateral for lenders for those starting a business and provides security if times become tough, or expansion is required. 

For many long-term owners, property has provided a means to build wealth during their business lifecycle, as the value of the business itself might be uncertain when the owner retires. In a rapidly evolving economy where many industries face disruption, this is increasingly common and particularly relevant for mature business owners who began long before the advent of superannuation, when property was and still is, seen as a visible and reliable investment. 

Business SA recognises that everyone, including our members, need to pay their fair share of tax. But there is a stark difference between tax avoidance and legitimate tax minimisation. For example, how many employees ignore their rights to legitimate work-related tax deductions? 

The State Government only introduced land tax aggregation changes to fill a budget shortfall caused by lower GST growth. However, Business SA has consistently stated that the budget will substantially benefit from the Valuer General’s Revaluation initiative which should be completed in 2021. If the existing Bill is delayed until the Revaluation is complete, the State Government will have a clear picture of its structural budget position and could then consider grandfathering land tax changes to protect existing investments made in good faith.