It's grim down the South Coast for the well-off
"land tax is a fabulous tax,..." Australian journalist Lisa Pryor understands the difficulties faced by those who complain about having to pay rates or "Land Taxes" on vacation homes that remain empty most of the year, –investment properties, in this instance in prime locations south of Sydney. We need a paradigm shift in our thinking about the inefficient use of our most precious resource - land.
Sydney Morning Herald
January 3, 2009
Holiday houses - like dogs and boats - play an important role in our society as they give wealthy people something to complain about. Sure, outsiders might think the well-off lead lives of ease, but listen to the stories of labradoodles with dicky hips, sailing boats stuck in dry dock all through summer and schoolies marauding through restive coastal hamlets, and you will understand everybody hurts, sometimes.
But if there is one complaint that trumps all others, especially at this time of year, it must be land tax, the cruel impost levied each year on those unfortunate enough to own holiday homes - or investment properties - which, through no fault of the owners, have massively appreciated in value since they were purchased.
As a former property reporter, I know a bit about this tax. I have written news stories about the injustice of it, because that is what reporters do; they write news stories from a range of perspectives, including those they disagree with. But with my reporting hat off, I want to explain what I really think: land tax is a fabulous tax, especially in this era when we suffer from a shortage of residential properties.
Land tax encourages better use of land. An annual tax bill gives the owners of multiple properties an incentive to rent them out, at least some of the time, to pay the bill rather than leaving the properties empty, except for a scattering of boogie boards and dog-eared packs of Uno, until the whim strikes to spend the weekend there. For the same reason, it gives owners of vacant land an incentive to build.
Land tax is a boon to those who actually live in coastal areas who have trouble, on regional salaries, competing in a real estate market with city slickers looking for a weekender. This is a real problem in regional areas. Because land tax makes it slightly less attractive to buy a holiday home, it means families in popular holiday areas such as the South Coast and Central Coast have a fighting chance of being able to afford a home vaguely by the beach. Same for retirees who want to move to the beach.
Land tax is only levied on owners who have land holdings worth more than $368,000. The bill is $100 plus 1.6 per cent of the land value over the threshold, until you get to $2.25 million, when the real victims of the cruel land tax regime are forced to pay 2 per cent.
This gives property investors an incentive to invest in affordable properties, which is where the real rental crisis exists, and an incentive to invest in properties that use land efficiently. A $500,000 unit attracts far less tax than a $500,000 house because it uses so much less land.
Knowing the passion of land tax haters, I fully expect letters of complaint from struggling holiday home owners. As I have seen in the past, property owners love to talk about how they simply own a "shack on the beach" and dismiss opponents as playing "the politics of envy". Well, let's just consider those terms for the moment.
Firstly, "shack on the beach". If your means are genuinely modest, you drive to the beach, catch the bus or rent a caravan. Owning even a shack near the beach is a lovely treat, a luxury. Premiums are paid for holiday houses in low-key, underdeveloped spots.
Consider two real estate listings on the Central Coast at the moment. At quiet, bush-fringed Pearl Beach, $645,00 will buy you a two-bedroom weatherboard cottage. Back from the coast, in the suburban hub of Erina, $625,00 will buy you a four-bedroom home with double garage and lap pool.
Secondly, the "politics of envy". This is a favourite expression of successful people trying to escape tax, as if it were a moral failing borne of bitterness to believe that success should come with obligations. For those lucky enough to afford multiple properties, the honourable thing to do is accept that with privilege comes responsibility. It is not communism to expect the better-off to shoulder more of the tax burden, it is decency. Bitching about how hard life is when you own more homes than you could possibly live in should be regarded for what it is, poor form. If you own more than one property and think your tax burden is unfair, you're not a battler. You're a cheapskate.