Land tax hike harms small businesses

By Sunny Liu

The recent state government hike on land tax for property owners has forced many small businesses out of the CBD, according to business owners and experts.

In November last year, the Victorian Government announced it would conduct valuations on land annually instead of every second year.

This change means property owners with commercial and residential land valued at or more than $250,000 will face more frequent land tax and council rate hikes as each year the land value increases.

Local CBD business owners described the policy change as “appalling”, which has played a major factor in some of the recent closures of iconic CBD retail shops.

Owner of the recently-closed Bourke St classical music store Thomas’ Music, Elisabeth Vodicka, said the steep increase in land tax had made the business unviable.

“The amount of land tax we pay has doubled ever since the new policy was put in place. It’s just appalling. How can the CBD’s retail industry survive when they do things like that?” she said.

David Beanham, owner of Modak Motorcycles on Elizabeth St, which had operated in the CBD for 88 years before it closed in February, said the land tax hike was the “final nail in the coffin” for his business.

“The policy introduced by the state government has more than doubled the amount of land tax we pay. Running a business is an economic proposition and we can’t be here forever without being profitable,” he said.

Both business owners expressed their frustration towards the lack of understanding of small business by the Victorian Government.

“It’s not a very supportive environment for small businesses at all,” Ms Vodicka said.

“Melbourne’s going to be left with a whole lot of chain stores and cafes, restaurants, bars and nail salons. It’s not going to be very interesting,” she said.

Victorian Treasurer Tim Pallas said the changes would make land valuations in Victoria “fairer and more consistent”.

CBRE and law firm Minter Ellison co-hosted a seminar on the impact of the state government’s land tax hike on CBD property owners on March 1.

On the panel were CBRE’s land tax specialist Dane Carruthers, building and depreciation specialist Neale Scott, director of middle markets and city sales Josh  Rutman, retail leasing specialist Zelman Ainsworth and Minter Ellison’s Ben Dodgshun.

The panel discussed the government’s recent changes to the land tax legislation, how property owners could effectively challenge land tax assessments and maximise depreciation benefits.

Mr Carruthers from CBRE said the hike on land tax could result in commercial rental increase.

“When property owners pay more land tax, they get that subsidised from the rent. So the tenants will end up paying more rent,” he said.

The land tax expert said this would mean that many small independent businesses would not be able to afford the rent in the CBD and instead more international and chain operators would snap up properties.

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