Commercial-Property-Land-Tax

Commercial Property and Land Tax

What are the effects of land tax on Commercial Property?

1. The Land Tax increases are higher than inflation putting downward pressure on the
valuation of commercial property;

2. If a tenant pays a net rent for their commercial property suite then they will pay for the
Land Tax increase. Therefore the Land Tax increase, particularly in shopping centres is a
tax on small business (despite the comments of the then Premier Morris Iemma on 2GB to
the contrary);

3. If a tenant pays a gross rent for their commercial property suite then it is the Landlord
who pays the Land Tax which puts downward pressure on the profitability of the
commercial property. If the net income of commercial property is reduced by taxes then
that necessarily has a negative effect on the valuation of commercial property; and

4. In the current leasing market, Landlords are not able to recoup the increase in Land Tax
from prospective tenants who are interested in leasing commercial property.

Increasing a property based tax at a time when some of the Banks are over-exposed to the
commercial property market is bad public policy.

The political implications of the NSW State Government increasing land taxes, particularly
as they apply to commercial property is perceived to be small because not many voters
directly pay for land taxes as they apply to investment and commercial property.

Indirectly many people are exposed to the commercial property market. Almost everyone
who is currently employed or used to be employed necessarily has a Superannuation fund.
The vast majority of Super funds invested in listed property trusts which predominantly
own commercial property. Any action the NSW State Government takes to increase Land
Taxes, thereby putting downward pressure on commercial property valuations, adversely
effects the wealth of many members of the public. This simple analsyis does not include the
many thousands of investors who directly own units in the Listed Property trust sector nor
the many thousands of land tax payers who own investment and commercial property.

In my view, any action the NSW State Government takes to unnecessarily increase Land
Taxes has a disproportionately negative effect on private wealth and is bad public policy.

If you are interested in leasing commercial property please contact us on 02 8920 1233
and we will do our best to cater to your commercial property needs.