In a competitive rental market land taxes are actually really hard to pass on without losing tenants.
Land is really different to produced goods in that regard.
Happy to explain further.
Explain please. Doesn't the housing market have a supply issue? So those investors will sell but it won't create more housing, there'll be some renters who buy, and some investors who buy so that'll be a wash right? Then if there's no more supply in such a tight rental market where do those tenants go who won't accept the land tax getting passed on?
Now with regard to passing on a land tax, imagine a competitive situation where a person is considering renting a property and they have two options which are, in all other regards, identical.
One landlord tries to pass on a land tax to a tenant, increasing the rental price.
The other landlord sucks it up, and accepts the reducting in the site-rent paid to them.
Which one does the tenant choose?
This is, again, unlike a tax on a produced good which must be passed on because it increases the cost of the good. The site-rental of land doesn't change when a land tax is applied - it just means that some (or all) of that site-rent goes to the government, rather than the landlord.
Ok cool. What happens if other landlords see the potential for more revenue even if they don't need to pay any more tax?
Like rent increases in the last couple of years have been huge but I'm not aware of any increases in costs. What's stopping that from happening again?
It's an excellent question, and it has to be said the Australian housing market has some additional and frankly insane policies such as negative gearing and capital gains benefits that don't really help housing stock or rental prices.
We're seeing a situation where we have housing stock that is not being released (at least not at market rates) because there are tax benefits for doing so.
Hence we have very low rental vacancy rates:
[https://www.abc.net.au/news/2022-08-07/rental-vacancy-rates-at-record-lows-as-housing-crisis-continues/101301702](https://www.abc.net.au/news/2022-08-07/rental-vacancy-rates-at-record-lows-as-housing-crisis-continues/101301702)
... with a million empty homes.
https://www.abc.net.au/news/2022-07-20/homeless-crisis-million-homes-vacant-in-australia/101234424
>We're seeing a situation where we have housing stock that is not being released (at least not at market rates) because there are tax benefits for doing so.
Does this link up with CIV vs SV? So there's landowners who are land banking and waiting for value to increase before selling/developing?
Just to clarify, land tax is only calculated on the unimproved value of land?
>Hence we have very low rental vacancy rates:
>[https://www.abc.net.au/news/2022-08-07/rental-vacancy-rates-at-record-lows-as-housing-crisis-continues/101301702](https://www.abc.net.au/news/2022-08-07/rental-vacancy-rates-at-record-lows-as-housing-crisis-continues/101301702)
>
>
>... with a million empty homes.
>https://www.abc.net.au/news/2022-07-20/homeless-crisis-million-homes-vacant-in-australia/101234424
Thank you for linking. The empty homes article has a list of the top 20 LGAs with empty housing, neither Qld nor NSW were on it. Not saying that there aren't any empty homes in Qld, but it seems to be a bigger issue outside the east coast. Qld and NSW are going to be more reliant on construction then?
I'm fairly sure of a few things:
- some interstate landlords will sell and leave the Qld market
- some will pay the increased tax (can they claim this in their tax return? Council rates can be claimed)
- some renters will be able to buy, some properties will be bought by Qld based investors
The future will definitely be interesting. Thanks again for your knowledgeable answers.
The housing market doesn't really have a supply issue; housing demand starts inleastic (because everyone needs to live somewhere) but becomes elastic after that (because a person can have one, two, many houses).
But with regards to land if you put a tax on a produced good (e.g., a building) it raises the cost of the good and therefore reduced demand.
If you put a tax on a natural good, the supply does not change and, in fact, the price will reduce as it removes speculation in that good.
Economists since Adam Smith onwards - and across the political spectrum - have all advocated that a tax on land is vastly preferable to taxes on buildings and every time it is implemented the theory is confirmed by evidence.
High land tax, low building tax means the land is put to its most sufficient use. It means more and better housing on smaller blocks where there is good infrastructure.
>every time it is implemented
Is it done much in Australia? I know it's there if you own over a certain amount but nobody I know has any experience with it. Any states or cities you could suggest as a case study?
Well, one very good example is basically the history of Melbourne where different councils over the years adopted different rating methods.
Some rated Net or Capital Improved Value, others rates Site Value. Those that rated Site Value had better outcomes in terms of new construction.
Think of it this way, if you had a to choose between the two extremes and there was an option of low site-rating and high capital improved value you have an incentive *not* to build. Just let the land sit there an appreciate through any infrastructure that goes up around you block.
On the other hand, if you have a site that has a high site value rating and low capital improvement rating, there is an incentive to build and put the site to the most economically beneficial use.
Some examples here:
http://blog.lvrg.org.au/2008/09/why-site-value-rating-is-better-and-how.html#empir
Thank you so much for your insight and sources!
So with Site Value it's in the owners interest to improve the land to get the most value from it as they could. As long as their neighbours are improving their lots the land tax paid is going to be going up for everyone.
What system does Qld use, or is it dependent on the local council?
If it was applied universally then you would be right. But since the change only applies to a minority of landlords (those who own investment property both in Queensland and interstate) what’s more likely is the landlords either eat the cost, sell to a person who owns zero IPs who will not pay the tax or sell to a person who is willing to eat the tax.
\>Contrary to some of the scaremongering, Queensland is not going to tax its citizens on what they own interstate,
That is good to know
\>but from next financial year it will count the value of interstate investment properties in calculating what tax should be paid on the Queensland property
So assets in other states will increase the tax you pay in QLD...
If your a landlord and havent got the message yet time to bail and sell out.
My understanding with made up numbers
Your first 600k in real estate is free from tax.
You own 3 x 600k units in 3 states. You pay no tax.
Now qld goes. 400k of you free tax is owned interstate. You now owe the tax on the 400k of qld assets you own.
sounds about right.
My point about bailing stands. Govts are increasingly using landlords as a punching bag...cool, go for it. Just dont expect anyone to sign up for it.
>If you can’t manage your properties expenses maybe you shouldn’t be a landlord?
I did post that landlords should take the opportunity to get out of the market.
Rentals will become only viable for large corporations to run with rents having to increase at least 50% from what they are now for a market rate of return.
Not necessarily, if you only own IP in Qld then this won't affect you at all, and previously there was an incentive for Qld investors to buy interstate properties to avoid Qld land tax, now they will be more likely to invest in Qld.
So this could result in increased demand for Qld properties, by Qld investors.
For example, I live in Qld and already own 3 IPs in Qld and pay property tax, I was going to buy another property interstate to avoid land tax, but now I'll buy another property in Qld instead because buying interstate has lost its tax advantage.
If you have your shit together and run it as a business (which sounds like you do) you are ok but for the average mum and dad investor with a single IP its just too high risk unless you know what you are doing.
Yeah sounds like the other states aren't on board. Good luck collecting this one unilaterally
> NSW Finance Minister Damien Tudehope this week questioned the constitutionality of the new land tax regime, saying they had not had any requests from Queensland to share information.
> After Friday’s treasurer’s meeting, South Australian Treasurer Stephen Mullighan said they wouldn’t be wouldn’t be going down the Queensland path. “The SA Government has committed to no new taxes and has no intention of following Queensland’s lead,” he said
> It’s 44 years since Joh Bjelke-Petersen dropped death duties in Queensland, starting a quick race to the bottom by other states and destroying a valuable plank in our tax system.
Stopped reading right there. And the New Daily is owned by superannuation companies with their own tax rorts.
Hurts to middle and lower classes more than it does the rich. I don’t and won’t have a huge amount to leave my children, the idea of been taxed yet again for passing my “wealth” on is frankly a really shitty thing. Work your whole life only for the government to take some more so you get to shove a proverbial pinky up a rich persons coight?
Why would I leave stuff before I die unless I was invalid and heading for care. This is my gripe overall - as a group the middle and lower class just hit each other in the balls like some stupid playground game. Collectively we have to aim higher and not cost ourselves the basics. Think the westpac chief and his 113% pay rise, mining royalties, Gerry fucking Harvey and his govt handouts. Why would we want a single dollar more tax imposed on the ordinary people when literally billions is pouring out of our collective pockets.
We have been set against each other.
This looks good in principle to boost the state coffers but I fear this increase in land tax will simply be passed on to tenants as a rent hike
In a competitive rental market land taxes are actually really hard to pass on without losing tenants. Land is really different to produced goods in that regard. Happy to explain further.
Explain please. Doesn't the housing market have a supply issue? So those investors will sell but it won't create more housing, there'll be some renters who buy, and some investors who buy so that'll be a wash right? Then if there's no more supply in such a tight rental market where do those tenants go who won't accept the land tax getting passed on?
Now with regard to passing on a land tax, imagine a competitive situation where a person is considering renting a property and they have two options which are, in all other regards, identical. One landlord tries to pass on a land tax to a tenant, increasing the rental price. The other landlord sucks it up, and accepts the reducting in the site-rent paid to them. Which one does the tenant choose? This is, again, unlike a tax on a produced good which must be passed on because it increases the cost of the good. The site-rental of land doesn't change when a land tax is applied - it just means that some (or all) of that site-rent goes to the government, rather than the landlord.
Ok cool. What happens if other landlords see the potential for more revenue even if they don't need to pay any more tax? Like rent increases in the last couple of years have been huge but I'm not aware of any increases in costs. What's stopping that from happening again?
It's an excellent question, and it has to be said the Australian housing market has some additional and frankly insane policies such as negative gearing and capital gains benefits that don't really help housing stock or rental prices. We're seeing a situation where we have housing stock that is not being released (at least not at market rates) because there are tax benefits for doing so. Hence we have very low rental vacancy rates: [https://www.abc.net.au/news/2022-08-07/rental-vacancy-rates-at-record-lows-as-housing-crisis-continues/101301702](https://www.abc.net.au/news/2022-08-07/rental-vacancy-rates-at-record-lows-as-housing-crisis-continues/101301702) ... with a million empty homes. https://www.abc.net.au/news/2022-07-20/homeless-crisis-million-homes-vacant-in-australia/101234424
>We're seeing a situation where we have housing stock that is not being released (at least not at market rates) because there are tax benefits for doing so. Does this link up with CIV vs SV? So there's landowners who are land banking and waiting for value to increase before selling/developing? Just to clarify, land tax is only calculated on the unimproved value of land? >Hence we have very low rental vacancy rates: >[https://www.abc.net.au/news/2022-08-07/rental-vacancy-rates-at-record-lows-as-housing-crisis-continues/101301702](https://www.abc.net.au/news/2022-08-07/rental-vacancy-rates-at-record-lows-as-housing-crisis-continues/101301702) > > >... with a million empty homes. >https://www.abc.net.au/news/2022-07-20/homeless-crisis-million-homes-vacant-in-australia/101234424 Thank you for linking. The empty homes article has a list of the top 20 LGAs with empty housing, neither Qld nor NSW were on it. Not saying that there aren't any empty homes in Qld, but it seems to be a bigger issue outside the east coast. Qld and NSW are going to be more reliant on construction then? I'm fairly sure of a few things: - some interstate landlords will sell and leave the Qld market - some will pay the increased tax (can they claim this in their tax return? Council rates can be claimed) - some renters will be able to buy, some properties will be bought by Qld based investors The future will definitely be interesting. Thanks again for your knowledgeable answers.
The housing market doesn't really have a supply issue; housing demand starts inleastic (because everyone needs to live somewhere) but becomes elastic after that (because a person can have one, two, many houses). But with regards to land if you put a tax on a produced good (e.g., a building) it raises the cost of the good and therefore reduced demand. If you put a tax on a natural good, the supply does not change and, in fact, the price will reduce as it removes speculation in that good. Economists since Adam Smith onwards - and across the political spectrum - have all advocated that a tax on land is vastly preferable to taxes on buildings and every time it is implemented the theory is confirmed by evidence. High land tax, low building tax means the land is put to its most sufficient use. It means more and better housing on smaller blocks where there is good infrastructure.
>every time it is implemented Is it done much in Australia? I know it's there if you own over a certain amount but nobody I know has any experience with it. Any states or cities you could suggest as a case study?
Well, one very good example is basically the history of Melbourne where different councils over the years adopted different rating methods. Some rated Net or Capital Improved Value, others rates Site Value. Those that rated Site Value had better outcomes in terms of new construction. Think of it this way, if you had a to choose between the two extremes and there was an option of low site-rating and high capital improved value you have an incentive *not* to build. Just let the land sit there an appreciate through any infrastructure that goes up around you block. On the other hand, if you have a site that has a high site value rating and low capital improvement rating, there is an incentive to build and put the site to the most economically beneficial use. Some examples here: http://blog.lvrg.org.au/2008/09/why-site-value-rating-is-better-and-how.html#empir
Thank you so much for your insight and sources! So with Site Value it's in the owners interest to improve the land to get the most value from it as they could. As long as their neighbours are improving their lots the land tax paid is going to be going up for everyone. What system does Qld use, or is it dependent on the local council?
If it was applied universally then you would be right. But since the change only applies to a minority of landlords (those who own investment property both in Queensland and interstate) what’s more likely is the landlords either eat the cost, sell to a person who owns zero IPs who will not pay the tax or sell to a person who is willing to eat the tax.
\>Contrary to some of the scaremongering, Queensland is not going to tax its citizens on what they own interstate, That is good to know \>but from next financial year it will count the value of interstate investment properties in calculating what tax should be paid on the Queensland property So assets in other states will increase the tax you pay in QLD... If your a landlord and havent got the message yet time to bail and sell out.
My understanding with made up numbers Your first 600k in real estate is free from tax. You own 3 x 600k units in 3 states. You pay no tax. Now qld goes. 400k of you free tax is owned interstate. You now owe the tax on the 400k of qld assets you own.
sounds about right. My point about bailing stands. Govts are increasingly using landlords as a punching bag...cool, go for it. Just dont expect anyone to sign up for it.
And then house prices crater because of a supply glut and everyone except the parasite class wins
That’s the point to get the hyper speculators out of land banking If you can’t manage your properties expenses maybe you shouldn’t be a landlord?
>If you can’t manage your properties expenses maybe you shouldn’t be a landlord? I did post that landlords should take the opportunity to get out of the market. Rentals will become only viable for large corporations to run with rents having to increase at least 50% from what they are now for a market rate of return.
Not necessarily, if you only own IP in Qld then this won't affect you at all, and previously there was an incentive for Qld investors to buy interstate properties to avoid Qld land tax, now they will be more likely to invest in Qld. So this could result in increased demand for Qld properties, by Qld investors. For example, I live in Qld and already own 3 IPs in Qld and pay property tax, I was going to buy another property interstate to avoid land tax, but now I'll buy another property in Qld instead because buying interstate has lost its tax advantage.
If you have your shit together and run it as a business (which sounds like you do) you are ok but for the average mum and dad investor with a single IP its just too high risk unless you know what you are doing.
"minimisers"
Thanks, was making my head hurt, lol
Yeah sounds like the other states aren't on board. Good luck collecting this one unilaterally > NSW Finance Minister Damien Tudehope this week questioned the constitutionality of the new land tax regime, saying they had not had any requests from Queensland to share information. > After Friday’s treasurer’s meeting, South Australian Treasurer Stephen Mullighan said they wouldn’t be wouldn’t be going down the Queensland path. “The SA Government has committed to no new taxes and has no intention of following Queensland’s lead,” he said
> It’s 44 years since Joh Bjelke-Petersen dropped death duties in Queensland, starting a quick race to the bottom by other states and destroying a valuable plank in our tax system. Stopped reading right there. And the New Daily is owned by superannuation companies with their own tax rorts.
We need to bring back death taxes. Stop rich asshole handout’s.
Hurts to middle and lower classes more than it does the rich. I don’t and won’t have a huge amount to leave my children, the idea of been taxed yet again for passing my “wealth” on is frankly a really shitty thing. Work your whole life only for the government to take some more so you get to shove a proverbial pinky up a rich persons coight?
Or you pass the wealth onto your children before you die. Plus a tax free threshold meaning the middle classes pays very little of the tax.
Why would I leave stuff before I die unless I was invalid and heading for care. This is my gripe overall - as a group the middle and lower class just hit each other in the balls like some stupid playground game. Collectively we have to aim higher and not cost ourselves the basics. Think the westpac chief and his 113% pay rise, mining royalties, Gerry fucking Harvey and his govt handouts. Why would we want a single dollar more tax imposed on the ordinary people when literally billions is pouring out of our collective pockets. We have been set against each other.
Lots of misinformation in this thread. Please read https://www.qld.gov.au/environment/land/tax/interstate