By Rich Harvey, CEO & Founder, propertybuyer.com.au
There’s been a raft of legislation surrounding the property investment space since early 2020. New tenancy laws were already being introduced to various state parliaments before COVID delivered a one-two punch to the sector. Suddenly, landlords were being asked to play their part through rent freezes and no evictions.
We’ve also seen investors kicked around like a political football during past elections. They’ve been seen as a soft target by some in the halls of power.
Now our country is in the middle of a rental catastrophe. There are simply too few properties available to meet tenant demand. Vacancy rates are tracking around – or below – one per cent in most capital cities. And we are about to ramp up the need for shelter as international borders are swung back open and skilled migrant numbers are lifted.
Yes, there’s a lot happening, which makes it so unbelievable that the Queensland government tried to implement legislation this year that would’ve seen investors flee their market and drive rents even higher.
Fortunately, the government announced on 30th September that the plan would be shelved, however things should never have got as far as they did.
So why was the tax defeated and what lessons can be learned from its failure by politicians and the public at large?
Queensland’s new land tax rules
Just prior to the Christmas break last year, when everyone was switching off their computers and the media was thinking about soft stories on the festive season – the Queensland state government announced a proposal to change land tax legislation.
It was a mind-blowing proclamation.
Under the proposed modifications, investors who held property in Queensland would be subject to a land tax burden calculated on their total property holdings across Australia.
That’s right. If you had a Queensland asset, all your other investment property holdings in New South Wales, Victoria, South Australia – wherever – would have been included in the calculation determining your tax liability in Queensland. It would have amounted to thousands more in tax for investors who chose to buy in Queensland.
The flaws in their policy
The changes passed into law on 24th June. Unfortunately for the Queensland government, this prompted stakeholders into action. A concerted campaign by representative groups, economists and property professionals identified the idiocy of the proposal.
Firstly, Queensland was the only state implementing this type of program. It was not a widespread practice, so the claims that this closed a “loophole” in the tax calculations were patently wrong.
Next – property that wasn’t even within its state borders would have been used to collect more tax for Queensland’s consolidated revenue. It’s akin to a mechanic charging extra to service your car because you have a second vehicle at home. It’s not like Queensland supplies services to benefit that interstate land. Why should they collect additional tax because of it?
Then there’s the Queensland rental crisis. They’re crying out for more stock, yet at this critical juncture, the government saw fit to disincentivise property investment.
What a ridiculous move!
Next – the government seemed to totally ignore the net financial outcome of implementing the change. According to their own numbers, the changes were expected to generate additional revenue of around $20 million. However, what they didn’t announce was how much it would cost to implement and enforce the new policy.
When I was a senior economist in my past life, we prepared a detailed cost benefit analysis of any policy change BEFORE it went to Cabinet and then to debate in Parliament. And strong consideration was given to the potential external impacts of a policy on relevant stakeholders – such as renters in this case and the local economy. It seems that step was badly missed in this instance.
The death knell for the tax
Part of the campaign to oppose the changes was analysis by the Property Investment Professionals of Australia (PIPA) who’ve just completed their annual investor sentiment survey. The study revealed that 19 per cent of investors nationwide were signalling an intention to sell Queensland property, with the number one reason being the new land tax laws. This study gave substance to the arguments proffered by property experts and economists everywhere.
But the fatal blow to the proposal came from other state governments. The first rebuttal came from the New South Wales finance minister who said his government didn’t support the tax change and he would not be helping Queensland collect it by providing information on property holdings in his state. At national Cabinet, other premiers followed suit.
Queensland Premier Annastacia Palaszczuk had no choice but to shelve the proposal.
Lessons to learn
So, what lessons can be drawn from this sorry episode?
Firstly, never doubt what can be achieved by a group coming together and shining a light on an irrational proposal. The galvanising of investor interests over this matter has been extraordinary and was doubtless the real reason for the change.
Secondly, politicians of all persuasions should stop underestimating the importance of property investors in the national economy. For too long they’ve been treated as a source of easy revenue by our leaders, but it’s apparent that investors have been pushed to their limits.
Of course, political hubris won’t let Queensland’s Housing Minister Camron Dick admit he got it wrong. He was still defending the changes even as they were being closed down – or shelved, as they put it – to be possibly implemented at some future date (trust me, they won’t be).
For mine, the real lesson here is for the political class. It’s that if you choose to ignore the concerns of Australia’s property owners, prepare for the consequences. We won’t stay silent any longer.
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