Why NSW is skewing its tax system toward build-to-rent apartments and away from mum and pop landlords


Harry Scheule, University of Technology Sydney

In an apparent about face, the NSW government has halved land tax for developers of build-to-rent housing.

It came weeks after the the Treasurer Dominic Perrottet launched a report that called for a greater reliance on land tax as a replacement for stamp duty.

The greater reliance on land tax is a long-term goal. At the moment family homes are exempt, along with boarding houses, caravan parks, retirement villages and farms. Most other users pay land tax, including landlords and businesses.

The change will give developers who invest in build-to-rent schemes offering long tenancies a 50% discount on their land tax for 20 years.

Why build-to-rent?

Most Australian rental properties are owned by individuals, units in apartment blocks as well as free-standing houses. Half are owned by landlords with only one property; three quarters by landlords with only one or two properties.

If you want to rent from a corporation, or from someone with wide experience in owning and renting properties, you’ll find it hard.

It makes Australia unusual.

Nails in walls can cause problems for tenants.

In other countries corporations rent out housing, big time. America’s five largest corporate landlords own 420,000 properties. Germany’s largest landlord, Vonovia, owns more than 330,000.

Overseas experience suggests corporations provide more affordable housing, and in many ways they make better landlords.

Individuals who own just one property have put most of their eggs in one basket.

Because they can’t afford for anything to go wrong they check the condition of the property regularly.

They prohibit nails in walls and pets, and typically offer only short-term leases.

Corporations can play the law of averages.

Because they know most properties will be well maintained they are satisfied with less-frequent inspections. They allow modifications, and typically offer long-term leases.

They offer an experience pretty close to ownership, in return for rent.

It’s this that the NSW government wants to encourage.

To ensure it happens and to ensure built-to-rents don’t revert to the Australian pattern of individual investors owning individual units, it will specify that the apartments have at least 50 units and are managed under unified ownership.

Tax makes it hard

At the moment such developments are discriminated against when it comes to land tax. No tax is due if the land value is below a threshold.

Individual landlords are usually below the threshold (some spreading their portfolio between multiple states to ensure they don’t trigger each state’s threshold).

Wholly-owned apartment blocks are above the threshold and can’t escape it. University of Technology Sydney calculations suggest land tax on build-to-rent developments can consume up to 27% of the annual rent collected.




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And they are subject to goods and services tax. They can reclaim some of it but not all.

The announcement comes at a time when the COVID crisis has cut stamp duty receipts and created an oversupply of vacant apartments, particularly around universities.

The initiative appears to have been crafted before the crisis and to be more forward looking. Many of the build-to-rent projects will take years to complete.

It’s about changing the mix

That said, any extra building activity will support the construction industry and extra stock will reduce home prices and rents.

The initiative doesn’t spell the end of mum and dad landlords. They will still predominate for a long time.

It’s about providing options and security for tenants that isn’t widely available and will become more important as a greater proportion of Australians rent.

Other states will be taking note.




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For a government that wants to eventually make land tax universal, the 50% cut is a step in the wrong direction. It might have been better to remove the threshold for small landlords.

But there’s no sign the NSW government has given up on its longer term goal. It’s unlikely to be the last time land tax rules are changed.The Conversation

Harry Scheule, Professor, Finance, UTS Business School, University of Technology Sydney

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Dine in or walk away? How to tell if a venue is COVID safe in NSW



Shutterstock

Lisa Bricknell, CQUniversity Australia

New South Wales premier Gladys Berejiklian has called for more businesses to register as COVID Safe, as the state recorded 19 new cases of coronavirus in the 24 hours to 8pm Tuesday night. Berejiklian said:

If I walk into a venue and I’m not comfortable with how COVID safe that venue is, I’d leave. I expect patrons to do the same.

Good advice — and timely, too. As NSW Health’s Jeremy McAnulty said on Wednesday, NSW is “at a knife’s edge, a critical point”.

Here’s what to look for when you walk into a bar, cafe or restaurant to know if it’s COVID safe — and how to know when to walk out the door.




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What to look for

Familiarise yourself with the rules business must follow to register as a COVID Safe business in NSW. The rules are here.

Screenshot of the steps to become a COVID Safe business.
Steps to become a COVID Safe business, according to NSW Health.
NSW Health

Check to see the venue’s COVID Safe certificate is clearly displayed and that they are taking every patron’s contact details. If a patron is dining in, the venue must be recording their contact details or checking they are registered with the COVIDSafe app.

If they’re not recording people’s details in some way, leave. If a COVID-19 positive case visits that venue, contact tracers are unable to do their job unless all patrons’ details are recorded.

Check if tables are appropriately spaced and that cutlery, napkins, glasses, plates, bowls or straws aren’t left lying on tables — even if they are disposable. Nothing should be on the table for people to pick up (or in a tub for patrons to collect themselves). Cutlery and other utensils should be brought out by staff when your order is ready. The idea is to reduce the risk of a COVID-19 positive person handling your utensils.

Your table should be 1.5m away from other tables but I’d even be trying to keep 1.5m from friends at my own table. Personally, I’d also want to see my friends wearing masks (it’s different if you’re dining with people with whom you live). Even if you or your friend had a COVID-19 test yesterday and it came back negative, that doesn’t mean you’re negative today. You could have been infected in the past 12 hours.




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Watch what happens when a patron leaves. Are staff appropriately sanitising tables and chairs with spray and, ideally, disposable paper towel? They should be.

Look around to see if the venue provides hand sanitiser for patrons — and keep an eye on the staff to make sure they are using it too.

Staff, ideally, should be wearing masks, in my view. I know that’s not yet compulsory in many places, but masks provide a barrier if a staff member is unknowingly positive. It’s hard to make patrons wear masks, because they have to eat, but I’d be looking for the staff to be wearing them (all staff, not just a couple).

Check if the venue is enforcing contactless transactions to reduce the handling of money, cards and pin pads. I know the evidence about the role of surfaces in spreading this coronavirus is still emerging but we should stick to universal precautions — if something can be avoided, it should be.

Staff should be limiting the number of patrons at the venue, and the number of patrons allowed in the venue at any one time should be clearly displayed. If people are lining up outside, make sure they are being spaced out too.

In general, aim for an open-air setting if you can, such as a beer garden or an open-air cafe. The more fresh air flow you have around you, the more transmission risk is reduced. Any sort of indoor socialising, where air flow is limited, is inherently risky at the moment in NSW.

People sitting in a restaurant with coronavirus restrictions
Eating out? Check to see if staff are sanitising surfaces, wearing masks, using contactless payment, and spacing out customers.
Shutterstock

When to leave

Breaches of any of the above would be enough to make me want to leave. But here are some more triggers that would make me think, “I’m getting out of here.”

If you see staff or patrons with symptoms — they have a cough, or cold, or seem unwell — leave.

If they are not wiping surfaces or tables, or allowing patrons to come in and seat themselves, leave. Patrons should be shown to tables that have been sanitised.

If the place is starting to fill up and you sense physical distancing is not being observed — leave.

A critical point

NSW is at an especially critical point. I’d be very, very careful right now. If I was in a Sydney hotspot, I wouldn’t be going out to dinner at all.

NSW is doing a good job of putting out spot fires but any one of those spot fires can flare up if people aren’t taking precautions.

If you thinking of going out, and you are wondering if it is risky, then you are better off not doing it. If you feel you have to go, then mitigate your risk by moving the event outside or making sure everyone is distancing and wearing masks.

COVID-19 is a really serious disease that affects young and old. You can get sick or even die, even if you are young and healthy — and the evidence on long term effects is worrying. And of course, healthy people can pass it on to someone who is in a high risk category. It’s so important that everyone continues to observe the appropriate protocols — today. This week. This weekend.

Until COVID-19 either burns out globally or we get a vaccine — and neither of those are right on the horizon and may not happen at all — then this may become the new normal, sadly. Infection control measures remain our best chance of keeping the pandemic in check.The Conversation

Lisa Bricknell, Senior Lecturer in Environmental Health, CQUniversity Australia

This article is republished from The Conversation under a Creative Commons license. Read the original article.

View from The Hill: With an abundance of caution, Palaszczuk puts out the unwelcome mat to Sydneysiders


Michelle Grattan, University of Canberra

As the Morrison government on Wednesday stepped up its attack on Western Australia over its refusal to open its borders, it faced a couple of awkward political questions.

The Prime Minister was quizzed at a news conference in Canberra on why his government was supporting Clive Palmer in his High Court challenge to the closure.

And on Perth radio, Attorney-General Christian Porter was asked whether the federal government would be thanked or blamed if Palmer won the case.

The Palmer challenge is in the federal court, which is dealing with matters of fact before the High Court hears it.

Well before the High Court decision, the federal government is calling the result, predicting the McGowan government is headed for a legal bruising.

“It is highly likely that the constitutional position that is being reviewed in this case will not fall in the Western Australian government’s favour,” Morrison said. Porter put the same view.

Whatever the ultimate court outcome, there is little doubt McGowan’s tough line has gone down a treat with his constituency. It has not just helped keep the state COVID-safe but fits nicely with those latent WA secessionist instincts.

The federal government is dealing with the bad look of being aligned with the discredited Palmer by simply denying the reality.

“Let me be clear, we are not supporting Clive Palmer,” Morrison declared, a proposition that was anything but clear.

“An action has been brought in relation to the WA border. It goes to quite serious constitutional issues which the Commonwealth could not be silent about,” Morrison said.

Porter’s take is that the Commonwealth isn’t arguing for either side in the case but is “a middle man…there to provide expert evidence”.

That evidence, however, backs up Palmer.

As a general rule Morrison, with economic considerations in mind, has never favoured closed state borders, though he had to give pragmatic support to the present NSW-Victorian closure. The states went their own ways regardless of Canberra’s view.

With no persuasive argument easily mounted at the moment to open any border to Victorians, the federal government wants WA to compromise by opening to low risk states.

Finance Minister Mathias Cormann, in an opinion piece this week, urged a “balance” between protecting the health of West Australians and “protecting current jobs and not standing in the way of the strongest possible jobs recovery”.

Porter warned WA’s all-or-nothing approach risked “an adverse finding in the High Court which requires you to do everything at once.” Both Porter and Cormann are West Australians.

As relations between the Morrison and McGowan governments became even more fractious over the border issue, Queensland premier Annastacia Palaszczuk announced on Wednesday she will close her border to Sydneysiders from 1am Saturday.

This followed two 19-year-old women who flew from Melbourne to Brisbane via Sydney and did not isolate (there is an investigation as to whether they gave false information). A third woman, a close contact, has also tested positive.

NSW premier Gladys Berejiklian wasn’t warned and, it can be assumed, wasn’t pleased. Earlier, she had been vociferous about the need for Queensland to open its border.

Asked about the Queensland action, Morrison said “I think it’s important to sort of put borders aside when it comes to those things”, preferring to focus on limiting movement of people from outbreak zones.

The PM wants targeted responses to outbreaks, not nuclear options.

His approach rests on an optimistic assumption – that limited outbreaks are capable of containment without a massive reaction, such as border closures or major lockdowns. For this to be correct, everything needs to go right.

The Morrison prescription also depends on other political leaders being willing to take some risks – and Palaszczuk and Mark McGowan are not.

Palaszczuk’s decision will bring economic costs for Queensland. Businesses expecting Sydney visitors will have cancellations, and future uncertainty will be created.

There will be some blowback for the premier, as she approaches the state election in October. But she calculates, probably correctly, the negatives will be a lot less politically dangerous than if she were seen to fail to do everything possible to protect Queenslanders’ health.

And the sudden high alert in Queensland is likely to just reinforce McGowan’s resistance to the federal government’s pressure to compromise.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

New South Wales on a knife edge as cumulative coronavirus case numbers spiral into the ‘red zone’


Mary-Louise McLaws, UNSW

New South Wales is on a knife edge after recording more than 150 COVID-19 cases over the last 14 days, a worrying sign the situation could spiral out of control.

The wide geographic spread is of particular concern, as it would rule out ring-fencing as a possible approach to containing the spread of the virus.

It comes as the Queensland government has closed its borders to arrivals from Greater Sydney after declaring the area a hotspot. People returning to Queensland from this area must quarantine in hotels for two weeks from 1am Saturday August 1.

Case numbers in NSW over the last fortnight.

NSW Health

NSW in the ‘red zone’

The state recorded 19 new cases in the 24 hours to 8pm on Tuesday, but watching the fluctuations in daily numbers doesn’t necessarily paint an accurate picture of the spread of this virus.

It’s better to look at rolling 14-day cumulative cases, meaning the last 14 days of new cases added together, which represents roughly two incubation periods.

My analysis of the data suggests when cases reach 100 over 14 days – the “red zone” – then an outbreak becomes very difficult to control. This happened in Victoria on June 18, before cases skyrocketed and a second lockdown was called for July 8.

Over the last fortnight, NSW has recorded at least 154 new cases (minus international arrives in quarantine), which is very concerning.

NSW had previously been tracking very well in managing the virus, before cases imported from Victoria started several chains of transmission, including the Crossroads Hotel cluster.




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The new cases are very spread out

Another concern is that many of the new cases are very spread out geographically. We’ve seen new cases in central Sydney, Casula and Bankstown in the city’s west, Harris Park in the north-west, and also several hundred kilometres south in Bateman’s Bay.

This spread rules out ring-fencing as a viable control method. Ring-fencing is a strategy to enforce stricter measures in a very defined location to prevent spread within the broader community. It has been used successfully in parts of Beijing, and in Melbourne’s north-west prior to the lockdown across metropolitan Melbourne.

What else can be done?

NSW authorities should consider strongly urging Sydneysiders to wear face coverings on public transport. Masks have been shown to offer protection against both getting and spreading the virus.




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The state also needs additional infection control measures in aged care. We can see the devastating impact of COVID-19 spread currently occurring in some aged care homes in Victoria. All staff should be wearing face masks or shields, and should be tested regularly for COVID-19, both of which are cost effective control methods.

Effective messaging is also key, particularly when aimed at young people, given over 40% of cases in Victoria are in people aged 20-39 years.

The government needs to disseminate public health messages on platforms that younger people typically use, perhaps by reinforcing the notion we all share responsibility for ending this virus.

Another risk that must be managed is public health messaging fatigue. Authorities need to help the public become resilient to changes in rhetoric as scientific knowledge about the virus advances.




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View from The Hill: Aged care crisis reflects poor preparation and a broken system


What to look out for

Over the coming days and weeks, NSW health authorities must keep an eye on the ages of people testing positive.

Younger people tend to have many more social connections, sometimes up to 20 close contacts in the infectious period. This means contact tracers need to work extra hard to locate and isolate all close contacts.

One person can result in more than 50 infections, where each person infects two others. The more social contacts you have, the greater the potential spread.
Shutterstock

I would be very worried if cumulative cases over a two-week period continue trending upwards and if many of the new cases were young people.

If even a handful of close contacts are not identified, they could go on to infect others and start even larger chains of infection.

One cause for hope is that rates of community transmission where the source of infection is unknown appear to be relatively low, though some cases are still under investigation.




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This article is supported by the Judith Neilson Institute for Journalism and Ideas.The Conversation

Mary-Louise McLaws, Professor of Epidemiology Healthcare Infection and Infectious Diseases Control, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.