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Why SA should introduce a broad-based "vacant property" tax

Opinion

South Australia should follow Victoria's lead and introduce a tax on disused properties, argues Ross Womersley.

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While much of the political focus in South Australia lately has been on energy issues, the state tax changes announced recently by the Victorian government show that South Australia needs another round of tax reform.

It has been nearly two years since the Weatherill Government opened and then fairly quickly closed its own State Tax Review. There were some resultant cuts to SA business taxes, and the removal of the Save the River Murray Levy and the Hindmarsh Island Bridge Levy, but the State Budget still shows a declining revenue base in the long term which, if sustained, can only lead to having to make cuts to vital services.

However, mirroring the Victorian announcement of a new 1 per cent tax on residential property left vacant for six months in a year could be a promising avenue to more revenue for the South Australian Government.

Perhaps more importantly, the move should encourage more productive use of real estate and could see more housing in the rental market. That would take pressure off spiralling rent increases which have been running above inflation for a long time now and are causing hardship for those on low incomes.

State governments can influence housing supply and contribute to housing affordability directly by building public housing, or indirectly through planning regulation, but the tax levers available at the state level to promote affordable housing are limited. Most of the big ticket items like negative gearing and capital gains tax are federal taxes.

Even state real estate sales stamp duties, which add considerably to the cost of buying housing, are difficult to manage. Given they are the state’s second largest source of own-tax revenue, any substantive cut in stamp duties to assist housing affordability would have dire consequences for the budget and the ability of the State Government to provide vital services.

In this context, the idea of an extra tax on vacant buildings looks appealing from both a revenue and housing supply/affordability perspective. But the concept need not be limited to residential housing. Empty shops and commercial buildings also cause economic and social harm and stand in the way of community development.

SACOSS recently commissioned a survey of 1000 South Australians and asked how they would feel about the idea of a higher rate of land tax on commercial land and buildings left vacant for two years. Without any further detail, the question just tested the broad idea and nearly half of the respondents supported the proposal. That was twice as many as the number who opposed the proposal, with the remaining 26% of respondents being unsure or wanting more information.

SACOSS first proposed a disused property tax in 2013, and again in our submission to the State Tax Review in 2015, but the government did not take up the proposal.

Given the fairly strong public support evident from these survey results, and the potential for a “vacant property tax” to promote more affordable rental housing as well as revitalise commercial centres, it is surely worth a second look from our government. If nothing else, we certainly wouldn’t want the Vics to get another one over us.

Ross Womersley is CEO of the South Australian Council of Social Service.

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