This week’s State Budget didn’t provide any great surprises, with many of the key announcements already well known.
From an urban development perspective, there were no new announcements except for a land tax reduction on new build-to-rent initiatives that meet eligibility criteria. We understand that this was designed largely to bring us into line with both New South Wales and Victoria, who offer similar concessions.
Perhaps it is what is not in this budget that says the most, both the good and the bad.
The Treasurer highlighted in his briefing that whilst other states had increased their land tax rates and introduced new property taxes for rezoning, he had ruled that out.
To his credit, it was the right thing to do, particularly for rezoning, because that type of tax would only inhibit new development and supply in a very tight market.
What was reinforced again by this budget is that massive expenditure in various areas like the health system and ultra-large road projects is underpinned to a large extent by property taxation revenue.
State taxation revenue estimates have been revised up by $257 million in 2021-22 compared to the 2020-21 Budget, mainly due to the strong uptake of the Commonwealth Government’s HomeBuilder grant – and that’s just the revision up. Next year, the Government will collect $1.736 billion in land tax and stamp duty revenue.
What is disappointing, but not surprising, is that whenever there is a buoyant property market, we squander the opportunity to take advantage of that revenue for transitionary measures to implement more permanent and structural reform. For example, reducing stamp duty on new and affordable housing, or at least measures for deferring its payment.
Lucas said in his briefing that to fix the health sector “reform has to be part of any solution” and the same has to be said about the property sector.
Unfortunately, the one small measure the government has taken – the new land tax discount for build-to-rent projects – will not have a material impact for some time. The government is forecasting expenditure of approximately $150K over the forward estimates, but at least it’s a start.
The government also continues to highlight the massive investment of almost $10 billion it is making on the North-South corridor, but unfortunately, that represents decades of expenditure on one road alone, and Adelaide is much more than that.
In their defence, this is unsurprising because they have little choice when it has to match its federal funding on only a limited selection of roads, but it does mean less for other general infrastructure in suburban neighbourhoods or transformative public transport projects.
In that context, and because infrastructure plays such a critical part in making and keeping Adelaide both liveable and competitive, it’s also not unreasonable to question how $860 million of investment committed for North Terrace projects alone could be spent more widely on infrastructure to increase the broader standard of living in South Australia.
Budgets are hard, particularly during a pandemic, but if South Australia retains more of its young people and those abroad make Adelaide home, we will experience more and more growing pains and there is much more we need to do.
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