Academic calls on Canberra to fix housing tax 'mess'

Participants at this week’s Canberra Tax Forum should look at developing a “package” approach to reforming housing tax in which “the federal government supports state governments in reforming their systems”, according to Miranda Stewart, co-director of taxation studies at the Melbourne Law School at the University of Melbourne.

Stewart calls the current taxation system a “complex mess of federal, state and local taxes, exemptions and concessions” in an article for academic commentary website www.theconversation.edu.au.

“The combination of our capital gains tax 50% discount, the ability to negatively gear investment in rental property as a deduction in the income tax, state stamp duties and poorly designed land taxes causes a biased investment housing market that contributes to Australia’s lack of affordable housing,” she says.

Executive director of the Australian Housing and Urban Research Institute Ian Winter agrees, saying the current tax system favours property investors (or the “landed gentry”)

Ahead of the start of the Tax Forum tomorrow, Stewart says reforms to improve the taxation of housing would fix some of the worst problems in state tax systems, and would make income tax fairer and more neutral in its treatment of different kinds of income and investment.

“A tax reform that rebalances the system to tax housing assets more neutrally and fairly can make a significant contribution to improving housing fairness, efficiency and affordability,” she says.

Her recommendations include:

  • adopting a 40% discount on net savings income where investors would “net off their income and gains on investments, against expenses and losses on those investments”
  • retaining the 50% capital gains discount and the ability to “negatively gear” interest for rental housing investments that are developed in the National Rental Affordability Scheme
  • reforming land taxes to improve valuation rules and rate structures. Land taxes would usually be lower on apartments than on houses, supporting city planning goals and affordable rental housing.
  • abolishing stamp duties.  Land tax to be reformed so that it applies to all real estate, including the main residence, at a low flat rate.
  • designing tax concessions in the new land tax, so that people without sufficient cash flow, such as pensioners, can delay payment until sale of their house

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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