Proposed housing tax reforms don't go far enough: HIA

Government proposals to reduce stamp duty and consider alternative tax arrangements for housing have been welcomed by the Housing Industry Association, but the organisation says more needs to be down address the “chronic housing shortage”.

During the two-day October Forum, the state taxes session discussion will look at opportunities to replace stamp duties on property conveyances with reformed land taxes.

The personal tax session discussion will consider whether there are opportunities to improve efficiency in the housing market with alternate tax settings and policies.

According to the discussion paper, stamp duty on conveyances currently contributes almost a quarter (23%) of state revenues, while land taxes account for 11% of state revenues.

However, the government acknowledges that stamp duty can suppress the number of transactions in the housing market and reduce the effective supply of housing.

HIA managing director Shane Goodwin says an acknowledgment that stamp duties are a highly inefficient tax while also leaving room for substantial reform to this taxation element is one of the pleasing aspects of the discussion paper.

Other proposals the HIA has welcomed include a commitment not to change the treatment of the family home in income support means tests and a reiteration of the importance of improving the efficiency of housing supply.

However, the HIA says much more needs to be done to reduce the tax burden placed on new housing by all tiers of government.

Goodwin says independent economic modelling by the Centre for International Economics has found that the total taxation burden on a new home can be well over 40% of its purchase price.

"Worryingly, most of the taxation burden is borne by the home buyer. The Tax Forum could be used to reduce this large impost on homes and hence increase housing supply and improve affordability."

"Housing is a true necessity of life, and the current restrictions to housing supply have created a large dwelling shortage that has driven escalating prices and climbing rents, and has placed unnecessary financial pressure on Australians already struggling to meet the rising costs of living," he says.

In the discussion paper, the government says that stamp duty applied to the transfer of property increases the cost of buying and selling a home and can have implications for individuals and the economy.

“Many factors influence decisions about where to live, but these transactional costs can make it more costly for Australians to move location to find work, can make it more costly to upsize or downsize a home as family circumstances change, and can penalise people who move for non-work reasons,” the paper says.

The HIA is one just two housing industry bodies – the other being the Property Council of Australia – that have received direct invitation to participate in the forum.

The forum, which will take place Parliament House in Canberra on October 4 and 5, will be a precursor to setting the federal government’s tax reform agenda.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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