Homeowners face steep tax hikes
âIt’s all caused by a slippage in the support. There haven’t been any changes to the scales and trigger points since 2009â¦ [and it is] creating capricious and unacceptable results. “
Mr Reisch, a German migrant who arrived in Australia 30 years ago with $ 2,000 in his pocket, says his situation is similar.
âI started out as a beekeeper and went from bees to hotels to new car franchises,â he said.
âI built the largest private BMW / MINI franchise in Australia over a 25 year period, employed over 200 people at two locations and was the official importer of Alpina BMW cars and paid a lot of taxes along the way, and I still do. “
After he and his investment partners sold the concession business, they retained key rental properties which are now in a real estate trust managed by Mr. Reisch.
A property is located at Commercial Road, South Yarra. He has a seven-year lease to a Volkswagen dealership with annual rent increases set at the Consumer Price Index, around 2%.
The property tax was initially around $ 50,000, dropping to $ 120,000 three years ago, and then to just under $ 200,000 last year. This year it has exceeded $ 350,000, which is half of the rental income of the property.
Most of the increase was attributable to a sharp rise in valuations based on âhighest and best useâ of land, triggered by recent rezoning in favor of apartments in the area and rising commercial values.
“There is concern that this trend will continue and we could be missing at the end of the lease term or even sooner,” he said.
Mr Reisch admits he is lucky he still has a profit (on which he pays 30 percent corporate tax). Many self-funded retirees will have out of pocket on smaller real estate investments, such as high street stores, if they face similar tax increases.
Investors were not taking into account the potential for a sharp increase in property taxes when calculating the return on the property they were buying, he said.
Victoria landlords cannot pass property tax costs on to tenants, unless they are publicly traded companies.
“Everyone has to pay taxes. It just has to be fair,” Reisch said. “You ask yourself: ‘Why invest in a rental property that employs 45 people when the yield is swallowed up by an uncontrollable property tax?’.
Daren McDonald, partner of Shinewing accounting consultants, said homeowners’ returns and returns were under attack. A cap on property tax increases or some form of indexation was needed to ensure this did not get out of hand.
“Some of these people will not be able to afford to keep the properties they own,” he said.