Victorian Premier Daniel Andrews says property investors and holiday home owners are entitled to claim tax deductions under the federal tax system, so his $4.7 billion tax levy should not badly affect them.
BDO tax expert Michelle Bennett said the Victorian hikes would directly undermine the federal tax take by up to $2.6 billion over four years.
Because property investors can deduct the cost of land tax from their property revenue, the federal government will receive less, or, in the case of property that is negatively geared, create larger losses.
Ms Bennett said the extra land tax would cost the federal government an estimated $1.4 billion, plus a further $1.2 billion when business claims a company tax deduction on the payroll tax increase.
Asked if he had received any blowback from the federal Treasurer Jim Chalmers or the Prime Minister Anthony Albanese for undermining the federal government’s tax take, Mr Andrews said no.
“Let’s talk about some of the land tax changes that we’ve made,” Mr Andrews said on Wednesday. “Landlords, any land tax is fully tax-deductible depending on the way in which they have their affairs arranged,” Mr Andrews said.
Earlier, Mr Albanese shut down suggestions the battling Victorian economy may need a federal bailout.
“I have every confidence in Premier Andrews and the Victorian government have done an enormous amount to invest in infrastructure,” he said on television show Sunrise.
“The Victorian economy is growing, the Victorian economy is growing, the Victorian economy is bouncing back after the pandemic like the Australian economy has done so.”
Holiday houses and investment properties are under fire in the Andrews government’s budget. Hemis / Alamy
Tuesday’s state budget cut the tax-free threshold for land tax from $300,000 to $50,000, imposing new yearly flat fees and increasing the rate of tax payable on properties over $300,000 by 0.1 percentage point.
Mr Andrews also rejected claims the state budget would drive up rental prices.
“Supply is the issue, and anybody who’s applying for a rental and finds that they’re one of 25 different applications – 50 even – and you’ve got estate agents and some landlords essentially running an auction for a rental,” he said.
“They can tell you there’s not enough supply, and that’s why we need to make better decisions and make them faster.”
He said Victoria would hand down a comprehensive housing statement within the next couple of months.
Mr Andrews also denied the budget was ideologically driven, despite Labor MP Sonja Terpstra tweeting that “it might encourage wealthy property [barons to] sell multiple properties increasing supply. Is that a bad thing? Like how many properties does one need to own”.
Mr Andrews said everyone had a shared interest in paying off COVID debt. “All of us, every single one of us has a collective interest in paying off that COVID credit card list, all of our kids and grandkids are left to do that. And they get no benefit from it,” he said.
“I fully acknowledge that there were some very difficult decisions that had to be made in this budget. And I’m not about kicking things down the road.
“But at the same time we have commentators out there today saying you’re paying off debt too slowly, others saying you’re paying off debt too fast.
“People are entitled to their views. What the government is never entitled to do is to make the easy, popular choice instead of doing the right thing, even if it’s hard.”
The budget also extracts $3.9 billion from businesses with payrolls above $10 million which Mr Andrews described as very, big business, despite tax experts warning it could apply to businesses with as little as 100 staff.
“Very big businesses – the top five per cent of businesses across our country, they have shared in almost $1 trillion in profits in the last three years, 24 per cent more profit than the three years before that. So, there is a capacity to make those important contributions.”
But Ms Bennett said the changes would hit the federal tax take under both the negative gearing rules and company tax levels.
“It may not only be Victoria that is affected – increasing payroll and land taxes for Victorian businesses and property investors will increase income tax deductions, so this will ultimately be subsidised to some extent through a drop in the federal government tax take,” she said.
https://news.google.com/rss/articles/CBMidWh0dHBzOi8vd3d3LmFmci5jb20vcG9saWN5L2Vjb25vbXkvZGFuLWFuZHJld3MtdGVsbHMtaW52ZXN0b3JzLXRvLWNsYWltLWhpcy1uZXctbGFuZC10YXgtb2ZmLXRoZS1mZWRzLTIwMjMwNTI0LXA1ZGF3cdIBAA?oc=5
2023-05-24 05:41:00Z
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