Manufacturers in Victoria, particularly in Melbourne’s southeast, are facing financial difficulties due to the COVID debt levy and inflated land valuations imposed by the State Revenue Office (SRO). The South East Melbourne Manufacturers Alliance (SEMMA), a peak industry association representing over 230 manufacturing companies, has received numerous complaints about the SRO inflating land values, with some manufacturers experiencing up to a 1000 percent increase in land tax within a four-year period. This significant increase in taxes is making it challenging for manufacturers to remain profitable and viable.
The land tax in Victoria is assessed annually based on the unimproved value of land and is determined by the valuer-general. Homeowners who live at their principal place of residence are exempt from the land tax, but it applies to those who own multiple properties, vacant land, or commercial properties. The inflated land valuations and subsequent increase in land tax are causing financial strain for manufacturers, making it difficult for them to invest in capital equipment or hire new employees.
Honi Walker, CEO of SEMMA, warns that if manufacturers have to pay exorbitant land tax figures, they may have to let go of employees and reduce their operations, leading to a contraction in the manufacturing industry in Victoria. This could also result in a loss of Australia’s sovereign capability as manufacturing would be outsourced to other countries, potentially compromising the quality and safety of imported goods.
Ian Cubitt, managing director of Catten Industries, expressed concern about supporting the Chinese economy at the expense of the local market. He emphasized the importance of local jobs and building a strong domestic economy rather than relying on overseas manufacturing.
The impact of rising land tax on manufacturers also has implications for customers. Michael Gilchrist, director of research and development at DSI International, explained that businesses will have to increase their prices to recover the costs imposed by the increased land tax. This reduces competitiveness and may lead to job losses and redundancies.
Libertarian MP David Limbrick and shadow minister for manufacturing, Bridget Vallence, have called for a freeze on the land tax and more transparency in how it is calculated. They emphasize the need to support manufacturers and reduce the burden of taxes to foster growth in the industry.
SEMMA members are scheduled to meet with the state Labor treasurer to discuss the issues surrounding the land tax. The Department of Treasury and Finance, the Office of the Minister for Jobs and Industry, and the Australian Manufacturers Workers Union have been approached for comment.
Overall, the inflated land valuations and subsequent increase in land tax are posing significant challenges for manufacturers in Victoria. The financial strain makes it difficult for them to remain profitable, invest in growth, and compete internationally. There is a growing concern about losing Australia’s sovereign capability and relying on imported goods of potentially lower quality. Stakeholders are calling for a freeze on the land tax and reforms to support the manufacturing industry and reduce the burden of taxes.
