The Urban Development Institute of Australia (UDIA) NSW launched a discussion paper this week proposing a state infrastructure funding alternative that uses GST to directly finance services for new communities.
UDIA NSW President Mr Ross Blancato said the paper, ‘A Better Way’, seeks to “use the GST to directly invest in Sydney’s future”.
“Returning the GST revenue to facilitate the activity which generates the tax is a transparent and equitable method of financing infrastructure,” Blancato said.
“This substantial contribution will both service the new growth and deliver significant benefits to the metropolitan region, its people and economy.”
Blancato said that the proposal shows how GST generated from property construction would amount to more than that required to adequately cover infrastructure costs.
“Sydney’s Growth Centres forecast [that] expenditure on state infrastructure [will be] $7.8bn over 25 years,” Blancato said.
“Target dwelling production in the Growth Centres is 160,000 dwellings over the same period. The average complete house and land package of $500,000 will therefore generate $50,000 in GST. Multiplied by 160,000 new dwellings in the Growth Centres, this equates to GST revenue of $8.0bn, more than sufficient to cover the state infrastructure costs.”
UDIA NSW also prepared a development feasibility model, which demonstrates that under the present market conditions, urban development on Sydney’s fringe is often not financially feasible.
“The only way in which this [unfeasibility] scenario will change is if the sale price of residential lots increases,” Blancato said.
“This, though, is not forecast to occur in the short to mid term, and would have consequences for a market with existing challenges to housing affordability.”
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