The Land Tax Amendment Act 2015 (WA)1 (Act) was assented to on 24 September 2015, bringing in a new land tax scale for landowners in Western Australia. This new scale will broaden the land tax base and aims to increase land tax revenue by $826 million over four years. In this Alert, Associate Gulshan Price and Partner Catherine Wheeler outline the key changes and impact on landowners in Western Australia.
Key Changes
The new land tax scale implemented in the Land Tax Act 2002 (WA)2 (LTA) will take effect from the 2015-2016 land tax assessment year, and results in the following key changes:
- Introduction of a minimum flat rate of $300 for properties with an unimproved value of between $300,000 and $420,0003; and
- Increases to all land tax rates (with the exception of the top rate) and adjustments to some thresholds at which the rates change4.
The changes are likely to have the greatest impact on landowners who own land with an unimproved value between $300,000 and $1,000,000, with some of those landowners expecting to receive their first land tax bill.
Set out below is the land tax scale for 2015/2016 and subsequent financial years (as compared to the previous 2014/2015 scale)
Reasons for the Changes
During the Land Tax Amendments Bill 20155 (Bill) second reading speech the Hon Peter Collier outlined the following rationale for the amendments6:
- The revised scale seeks to be more consistent with land tax arrangements in other jurisdictions and more evenly distribute the land tax burden across all land taxpayers in WA.
- Under the current scale, the top 1.5% of taxpayers who own land with an unimproved value of $5.5 million or greater pay 74% of total land tax revenue in WA. Taxpayers who own land with an unimproved value between $300,000 and $1 million on the other hand, comprise 81% of all land taxpayers, but only contribute 3 per cent of land tax revenue.
- The new scale will see a more balanced distribution, such that the top 1.6% of taxpayers who own land with an unimproved value of $5.5 million or greater will contribute 66% of total land tax revenue, whilst taxpayers owning land with an unimproved value between $300,000 and $1 million will contribute 6.3% of land tax revenue.
Watch this space
The new land tax scale was announced in the 2015-2016 Western Australian state budget and is purportedly one of a number of proposed revenue and savings measures.
Land tax revenue is estimated to increase by an estimated $184m in 2015-2016 and $826m over the next four years. Whether further increases will occur is anyone's guess. Perhaps the clearest indication can be found in the second reading speech where the Hon Peter Collier outlined Western Australia's position against the other Australian States:
"Except for South Australia, all other states levy a minimum flat amount of land tax. The flat amount in other states averages $365. Despite the changes to the land tax scale, Western Australia's land tax will remain competitive with that in the other states. For example, for a landholding with an unimproved value of $1 million, land tax payable in Western Australia will be $1,750, compared to $2,975 in Victoria, $4,500 in Queensland and $11,588 in Tasmania"7
In the example given, the land tax paid in Western Australia is lower than in some other States, which suggests that there is scope for further increases if indeed 'Western Australia's land tax (is to) remain competitive with that in the other States'8.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
