Current Issue #478

The land tax mess shows no good idea goes unpunished in South Australian politics

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For months the state government’s land tax reform has brought endless political headaches and open revolt from its property-owning supporter base. As the wounded policy limps on, what does it all actually mean?

If the words “land” and “tax” immediately make you fall into a deep and dreamless slumber then the last little period of South Australian politics must have been marvellously refreshing.

What began as tweak to address some unintended consequences of the existing law – and claw back some much needed government revenue – has turned into a drama which has been dazzlingly fiery, despite being over something remarkably mundane.

See, the Liberal government led by Premier (checks notes) Steven Marshall decided to challenge public expectations by doing something surprisingly progressive for a government that has shown little familiarity with that adjective thus far.

Marshall and Treasurer Rob Lucas go behind a proposal to bring in a change to the land tax which amounts to closing a loophole by which people who own multiple properties below the $450,000 land tax threshold have been avoiding paying tax on their holdings by creating a series of individual trusts. Under the proposed change the government would instead consider all properties owned by the same people to be one combined portfolio and assess the tax obligation upon that full value.

Still awake? Excellent.

Now, land taxes are basically a very good idea. Land is an inflexible resource and the idea that people who get exclusive access to it should contribute to the community for that privilege is a solid one. So closing what is an obvious workaround – as has happened in Victoria and NSW – should be relatively uncontroversial.

At least, that’s what you’d assume if you’re an optimistic naif who has only recently arrived on this planet and has no idea of the workings of our human politics. But for those of us native to Earth, we are familiar with how even the smallest issue tends to metastasise into a huge clusterfreak of outrage, self-interest, and breathless, off -the-record briefings from all sides of politics.

And this is what came to pass, complete with developer-backed lobbying by Christopher Pyne, former playful chaos-imp of the federal government, because the man has time on his hands and souls to reap.

The Land Tax Golem has become the Festival State-specific manifestation of the Franking Credits Boogeyman which roamed the nation after being unleashed by the federal government during the May election, right down to the peculiar quirk that many of the people most up in arms about it are people whom it won’t remotely affect.

The AM airwaves have been abuzz with people worried that the family home will be taxed into oblivion, the same way that people without share portfolios thought Bill Shorten was going to lead gangs of ATO compliance officers in ransacking their homes.

Here’s a handy tip on whether the land tax changes affect you: do you own a bunch of sub-$450k value houses? If no, congratulations: your life continues upon its blissful course.

If yes: have you deliberately arranged a series of complex financial entities to escape paying tax? If so, you should stop worrying about land taxes and instead brace yourself for the imminent arrival of three Christmas-themed ghosts to teach you some valuable lessons about what’s truly important.

And look, no-one ever thinks of themselves as obscenely rich. However, at the risk of getting all bolshy about the landlording classes, I’m going to go out on a limb and say that if you’re the sort of person who has arranged multiple trusts to administer your numerous properties to minimise your contribution to the common good, then you’re probably doing pretty OK for yourself. Tax avoidance schemes, especially complex legal ones, don’t come cheap.

And it’s weird that the more progressive sorts in the SA parliament didn’t immediately flag that they’d be waving this legislative sucker through and save their powder for more important disagreements.

After all, in its original form the proposed changes to the law were exactly the sort of progressive tax loophole–closure which Left -adjacent parties would presumably (a) want and (b) find enormously difficult to pass on their own, since conservatives would immediately claim this was a war on aspiration and the politics of envy blah, blah, etcetera, blah.

What’s particularly frustrating is that this kerfuffle over the proposed legislation has led the state government to propose numerous compromises, such as a compensation fund and reduced top-end tax rates, to the point where, if these changes do finally shamble into law, their utility will be compromised both as a revenue-raising scheme and an exercise in progressive income redistribution. This is why we can’t have nice things.

But just from a philosophical perspective, we really don’t need to punish the Marshall government for offering up a decent policy – they may not risk doing it again.

Update: A heavily revised land tax bill finally passed the Legislative Council on Thursday with the support of Greens MLCs Mark Parnell and Tammy Franks, following the addition of multi-million dollar commitments to public housing and emergency accommodation among other concessions.

Andrew P Street

Andrew P Street

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Andrew P Street is a freelance writer whose books include The Short And Excruciatingly Embarrassing Reign Of Captain Abbott (2015) and The Long And Winding Way To The Top (2017).

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