CBD landlords are feeling the impact of increased land tax as a result of two years of booming development site sales. This has led local councils to reevaluate land values right across the board. Location will obviously dictate just how much of an increase you will be hit with. The state average for 2016 was 15.8 per cent for commercial properties. However some sites in the CBD have faced almost a trebling of this figure.
It is important to look at how these changes will impact smaller private owners of commercial property, who don’t have the large, diversified portfolios to absorb the increases in land tax. According to a spokesperson from the City of Melbourne, 50 per cent of all valuation objections to 2016-17 came from commercial ratepayers. This shouldn’t come as any great surprise.
The chief of policy and housing at the Property Council of Australia, Glenn Byres, said, “there has not been genuine land tax relief for 10 years.” He would like to see the top rate fall from 2.25 per cent to 1.7 per cent. He also points out that, “the yearly charges impact heavily on small business as there is no correlation to the performance of the business.”
We should also clarify that you only pay land tax if the total taxable value of all the Victorian land you own (whether individually or jointly), as at 31 December 2018, is equal to, or exceeds, $250,000 ($25,000 for trusts).
Your 2019 land tax is calculated on the site value of all taxable land you owned on 31 December 2018. The State Revenue Office uses the site values (prepared by councils in 2018) to calculate your 2019 land tax. Most Victorian land has increased in value since it was previously valued in 2016. This means the total taxable value of your land will have increased, affecting the amount of land tax you have to pay.
However, some Melbourne landlords are coming up with “creative ways” to find extra rent to offset some of these tax rises. Reutilising ground floor or rooftop spaces, parking, advertising signage, are among just a few additional measures that can be taken to help counteract the additional costs. It should also be pointed out that you could object to any increases. Property owners have 60 days in which to file their objections. Otherwise, the increases will be deemed as having been accepted.
The Property Council has stated that they would support a review to ensure a “flatter and fairer land tax system that actually attracts investment and growth.”
HKC keeps abreast of all legislative and statutory changes in relation to clients’ portfolios. This enables us to best manage your portfolios effectively, offer solutions and ensure returns for owners. Talk to HKC today about how we can best manage your property.