Private Members Statement
Mr ANOULACK CHANTHIVONG (Macquarie Fields) (16:50): — It is good to see the Member for Castle Hill back in the Chamber; we wish him good health now and forever.
I welcome this debate. I move: Today I put before the House part 4 of the humble working-class economist's analysis of the Liberal Treasurer's snake oil never-ending annual land tax on the family home.
This tax con, masquerading as economic reform, is at best misleading and at worst a snake oil scam. Through some magical pudding recipe, this Liberal Treasurer has said on multiple occasions—even recently, as quoted in the property section of today's Australian Financial Review—that replacing stamp duty and sending home owners a never-ending annual tax bill will improve home ownership.
It has nothing to do with income, employment, economic conditions, interest rates, access to credit, and the two main ingredients—demand and supply. It all has to do with this Liberal Treasurer sending people an annual tax bill to their letterbox and, voila, more people own homes. Give me strength, Acting Speaker!
Jessica Irvine from The Sydney Morning Herald talks about those factors in her February opinion piece. What she does not say is that sending an annual tax bill to people's letterbox increases home ownership rates.
She does not make this argument because there is no truth in it—pure, plain and simple. Matthew Cridland from the Australian Financial Review in his 18 March article calls out this never-ending annual land tax on the family home as "comparable to a death duty", which accrues interest on the deferred debt.
He rightly alludes to the scenario where the annual land tax can increase any year on the whim of this Liberal Government or where land valuations increase. This Liberal Treasurer does not deny an increase in a home owner's annual land tax bill.
I want to explore increasing annual tax bills because it is important for all members and the general public to understand that this scheme is nothing short of a greedy cash grab. The annual land tax bill is essentially a multiplication of two variables—the rate of taxation times the value of your unimproved land value.
If this Liberal Government raises the flat rate or the percentage taxation rate then we will get a higher annual land tax bill. Alternatively, if your land value goes up but the taxation rate remains the same, your annual land tax bill goes up.
If both the value of your land goes up and the taxation rate goes up to plug the Government's billion-dollar infrastructure budget blowouts, then we are totally stuffed! None of those scenarios seems particularly positive for any home owner given the annual tax bill is in addition to their council rates, electricity, water and gas bills—on top of general living expenses and, of course, tolls.
I have undertaken some forecasting analysis to estimate the annual land tax bill a home owner could be up for under this reform scheme. CoreLogic property data over the past 25 years estimates that the annual percentage increase in the median property price is about 7.6 per cent or about 6.8 per cent nationally.
For a home owner out my way, in Leppington, who has just bought their dream home and land package for a conservative price of $800,000 with an unimproved land value of $500,000, the total annual land bill looks like this: At a 7.8 per cent annual increase, after one year the value of their land increases to $539,000 and their annual tax bill goes up by $117 to $2,117; after five years, the land is worth an estimated $675,000 with an annual land tax bill of $2,526 or an additional $526 since they bought the house; and so on until the property is transacted.
If the property is held for 20 years, the total land tax bill is $77,141, which is more than double the initial estimated $31,000 in stamp duty, excluding the deducted concessions provided to first home buyers.
The above scenario assumes that this Liberal Government does not increase the taxation rate higher than 0.3 per cent and/or increase the flat rate above $500, which would make the annual tax bill just unaffordable.
So while people are working double shifts to pay off the mortgage and making endless trips to Bunnings to improve their most valuable asset, this Liberal Treasurer is demanding that they pay him more taxes every year whilst he does nothing. It is just not right, nor is it fair.
Even at a lower increase rate of 6.8 per cent, the estimated aggregated land tax bill over 20 years is $70,167. With a still more conservative 5 per cent annual increase, the aggregated land tax bill is $50,306.
We can slice and splice it however we like, but the result is still the same: Home owners are worse off.
This tax reform is nothing but a con and a greedy cash grab. The politics and practicalities of the strategy and position are very simple: The strategy is to market the land tax as an innocuous reform that brings all things to all people, but the actual position is just a greedy cash grab that makes home owners worse off.
The humble working‑class economist series exposing this land tax con will be continued.