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Ever-widening net tipped for new tax

THE Gallop Government’s first budget provided a big surprise for 900 WA property owners, who were told their exclusive addresses meant they would be handing another cheque to the taxman.

Left with a $485 million “budget black hole”, the Government has introduced a premium property tax, which will be levied on landowners with residential blocks worth more than $1 million at a rate of 2 per cent each year.

Residents in 15 metropolitan suburbs and some Busselton residents will be hit by the new tax. The top five suburbs affected will be Peppermint Grove, Mosman Park, Applecross, Dalkeith and Claremont.

In introducing the tax, the Government said the measure would “broaden the State’s tax base and thereby reduce pressure in the future to increase rates on existing taxes”.

It also claimed it was taxing those who could afford to pay, suggesting the average unimproved value of the properties to be taxed is about $1.6 million, 14 times higher that the average unimproved value of land owned by other Western Australians.

However, property organisations, local councils and residents are loudly protesting to the contrary.

WA Property Council president Tony Packer said the premium property tax was flawed as it only took into account the value of unimproved land and not other assets.

“If they really wanted to assess who was and wasn’t rich, then they would look at how much the house and land package was worth and examine other assets,” Mr Packer said.

“There are people who have $4 million blocks of land that have been in the family since the 1950s, who are now facing a bill of $60,000 a year. Sure, they live on a great piece of land, but they are not millionaires.

“Some people will have land that is much cheaper but will have a house worth $2 million on top of it, and they won’t pay the tax.”

Applecross Action Group spokesperson Derek Fisher said if the tax came into force, riverside homes would be reserved for the incredibly wealthy.

“It is a really sinister tax … 15 years ago, when we had a windfall, we bought our property but we never anticipated having to pay large amounts of tax because of where we lived,” Mr Fisher said.

“A lot of our neighbours are facing a similar situation and there is no way they can afford it.

“This tax will mean these parts of the river will become a precinct for the truly rich.”

Mr Packer said he had been contacted by hundreds of people who said they would have to sell their homes because they could not afford to pay the tax.

“But the trouble is, who is going to want to buy a property that they will have to pay tax on every year?” he said.

Many of these people had inherited a family home or had purchased it decades ago when the land was much cheaper, Mr Packer said.

An exemption will be granted to pensioners, allowing the payment of the tax to be deferred until the property is sold or the owner passes away.

Subdivision also is being considered by property owners with bigger blocks in search of ways to avoid the tax, and local councils are expecting requests to start coming in.

However, property owners in areas such as Peppermint Grove are likely to find this option closed to them.

“The Peppermint Grove Shire Council is not in favour of battleaxe blocks and we have community support for larger block sizes,” shire chief executive officer Graeme Simpson said.

“In many cases subdivision is simply not possible because of technical and physical difficulties that involve the rear laneways.

“However, if it is possible, we will consider it.”

The new tax also may affect the operations of local governments, especially in their decisions regarding rates, according to Mr Simpson.

“I would suggest that councillors would be very reluctant to put up rates in light of this,” he said.

The option of subdivision also could be closed to heritage properties.

Heritage Council corporate public relations manager Michelle Finucane said the subdivision on heritage properties were treated as any other development applications, which took into account structures and surrounding land.

“We look at the heritage significance of all the elements on the property to decided on an application,” Ms Finucane said.

“So, for example, if landscaped gardens were significant to the heritage of a property, then we may refuse a subdivision on those grounds.

“However, we have allowed subdivisions on heritage properties where it has not affected the historical significance of a property.”

The tax, which is due to come into effect in January 2002, is expected to generate $12.1 million in its first year, but Real Estate Institute of WA president Graham Joyce said as property values rose, more and more people would be affected in future years.

“The premium property tax will blow-out and catch more than the present number of affected home owners as property values rise,” Mr Joyce said.

“We are concerned that the new tax will eventually spread and future governments will be tempted to take advantage of this.”

One property owner, who did not wish to be identified, suggested the tax would catch people with properties worth $500,000 within 12 years. He said that, based on the average annual increase in land value across 224 Perth suburbs during the past 12 years, land worth $500,000 today would be valued at more than $1 million in 12 years.

“And if a person has land worth $700,000 today, it will only be six years before the tax clicks in,” he said.

WA Property Council policy and communications officer Geoff Cooper confirmed these figures were correct, assuming land values continued to rise at an average of 9.3 per cent each year and an inflation rate of three per cent.

“This tax is a stealth tax, it has been specifically designed to catch more and more people each year,” Mr Cooper said.

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