SA Budget hits property with more taxes

SA Budget hits property with more taxesSouth Australian property owners were slugged in the 2014/15 State Budget by a sharp increase in the Emergency Services Levy (ESL) paid on all property and confirmation that the Government intends to introduce a $7 car park tax in July 2014.It is disappointing that property owners once again bear the brunt of tough Budget measures.The increase in the ESL will affect all property owners and it adds to the growing cost of owning property. Property taxes as a percentage of total taxes are expected to jump from 40.0% in 2013/14 to 42.3% in 2014/15.The car park tax will hurt retailers in the Adelaide city centre and diminish investor appeal for CBD property. Adelaide needs incentives to help grow the state economy not another tax that will add to the cost of doing business in the city.On the positive side it is reassuring that $10 billion of committed infrastructure work from earlier Budgets will continue and some $1.1 billion of new infrastructure work was announced in the 2014-15 Budget.It is also pleasing that the Government is responding to the housing needs of seniors. The Budget includes an $8,0 grant to help people over 60 years of age downsize into a more appropriate home. This is good public policy and it will help to free up larger existing homes for growing families.Importantly there were no increases to land tax and stamp duty rates however the Budget failed to include much needed reforms to the state’s property taxes, which are some of the highest in Australia.Tax reform is a key factor in making South Australia a more attractive location for out-of-state businesses to relocate. The property sector cannot be expected to continue to do the heavy lifting of fixing the annual State Budget.Budget backdropThe Government Budget strategy is based around the current financial year being the low point in the South Australian economic cycle before growth returns next year. The Budget forecasts SA’s Gross State Product (GSP) to grow by around 1¾ per cent in in the current financial year, which is well down on the national average. However GSP is forecast to increase in line with national trends and grow by 2¼ per cent in 2014-15, boosted mainly by more dwelling investment and farm production.South Australia’s annual population growth rate continues to be supported by gains in net overseas migration. South Australia’s estimated resident population grew by 15,300 during the year to September 2013. Net overseas migration accounted for the bulk of the population gain (11 900) and, to a lesser extent, natural increase (7300). These gains, however, were partially offset by continuing losses interstate (3900).The Government is laying the blame for increased taxes and a string of austerity measures in the Budget on reduced federal funding of the state’s health sector, of some $8 million over the next four years. To address this the Government is removing remissions on the Emergency Services Levy that is paid by all property owners, introducing new efficiency dividends in the public sector, and its deferring uncommitted infrastructure projects.The Budget is forecasting a Budget deficit in 2014-15 of -$479 million followed by a surplus of $406 million in 2015-16. The surplus is projected to grow to $776 million in 2016-17 and $883 million in 2017-18.Public sector austerityThe Budget includes further public sector efficiency dividends on government agencies of 1 per cent as well as:pay freezes for Executives and Ministerial advisors in 2014-15, merging DMITRE and DFEEST to create the new Department of State Development, andreducing expenditure on non-service consultants and contractors, and procurement efficiencies.TaxationTotal property taxes in 2014-15 are expected to be $1,915 million which is an increase of $279 million on the previous year. This is a result of the introduction of the parking tax, the increase in the Emergency Services Levy and extra stamp duty revenue from more property sales. Property taxes as a percentage of total taxes are expected to jump from 40.0% in 2013/14 to 42.3% in 2014/15.The removal of remissions on the Emergency Services Levy on fixed and mobile property will raise $357 million over the next four years. The following is an outline of the increase in the Emergency Services Levy.For more details see the Emergency Services Levy website.There were no changes to land tax or stamp duty rates in the Budget.Car Parking TaxThe Government proceeded with introducing a car park tax in the Budget. The Transport Development Levy comprises $7 per bay parking bay in the Adelaide CBD. It is proposed to be introduced retrospectively from 1 July 2014.However the car park tax faces a protracted passage through Parliament and the Opposition and key independents in the upper house have declared they will oppose the measure when it is introduced.Seniors Housing GrantThe Seniors Housing Grant (SHG) is a once off grant of up to $80, available to natural persons, aged 60 years or more, who are purchasing or building a new home valued up to $400 000 and will phase out for eligible homes valued up to $4 000. For first home owners, the SHG is not available in addition to the First Home Owners Grant. For more information see the Seniors Housing Grant website.Infrastructure investmentThe Budget includes confirmation that some $10 billion of committed infrastructure work in the pipeline will proceed. In addition the Budget includes $1,129 million of new infrastructure initiatives, including:$620.0 million for the North-South Corridor Darlington upgrade,$160.0 million to extend the O-Bahn guided busway including a tunnel below Hackney Road from near Plane Tree Drive under North Terrace emerging near East Terrace, $152.5 million to electrify the Gawler rail line from the city to Salisbury, and$85.0 million to construct a second high school in the city on the existing Royal Adelaide Hospital site, to become operational in January 2019.For a full review of new infrastructure projects see the 2014-15 State Budget infrastructure report.The Government has commenced a process to update the Strategic Infrastructure Plan for South Australia 2004/5-2014/15 to map out infrastructure priorities for the next 10 to 15 years.Job creationThe Budget includes several job creation initiatives, including:$44 million over four years for a new State Drill Core Reference Library and a Mining and Petroleum Services centre of excellence at Tonsley, $52 million over two years towards the Skills for All initiative, to ensure industry training needs are met. This will fund an extra 20 000 VET students, and $9 million over three years to establish Green Industries SA to work with the business, government and the environmental sector to realise the full potential of the green economy.Contact the Property Council of AustraliaFor more information about the impact of the 2014-15 South Australian State Budget on the property sector please call Lino Iacomella, Acting Executive Director of the Property Council of Australia SA Division: (08) 8236 0900 l 0417 1974 l [email protected]