Report slams government housing approach

The Australian government has been advised to eliminate stamp duties, reform tax incentives for property investment and shape-up the private rental sector in order to ease first home buyers onto the housing market ladder.

“Stamp duties discourage households from moving to housing that better suits their needs. In comparison, annual property taxes such as land tax and municipal rates are less likely to distort households’ decisions. They also distribute the tax burden more fairly,” claims Jane-Frances Kelly, author of the Grattan Institute’s Renovating Housing Policy report.

She says stamp duty should instead be replaced by an annual broad-based property tax levied by state governments.

“This would also replace the existing narrow land tax regime that exempts the family home. As proposed in Grattan Institute’s 2012 report, Game-changers: economic reform priorities for Australia, the new property tax could be administered through the existing municipal rates system, which already has a much broader base than land tax.”

Furthermore, Kelly argues, reforms to tax arrangements that favour property investment would help to reduce investor demand, easing pressure on house prices and making it easier for households on the margins of home ownership to buy a home.

"If governments want to increase home ownership and at the same time give the many renters a better deal, they should reject policies that reward those who already own homes while making life harder for those who don't.”

Federal and state governments currently forgo more than $40bn in revenue from tax concessions and exemptions to home owners and property investors, while providing little assistance to renters, according to the report.

"Expenditure on housing policy most benefits households that already own a home, followed by households that invest in residential property; and within both groups higher-income households receive the greatest subsidies.”

"It's a rising form of inequality that damages economic productivity and the fair go,” says Kelly.

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Comments
  • Gale says on 22/10/2013 03:05:40 PM

    Implementing these kind of draconian changes would certainly see investment monies go off shore, and what would the renters rent?

  • Deborah Ens says on 22/10/2013 03:43:36 PM

    Tax incentives to investors is effectively a subsidy to renters! Investors currently pay stamp duty, land tax, income tax on rent ,and Capital Gains Tax on a sale. There has to be some incentive or no one will invest and then where will the 30% of the population that is renters live??

  • Sam says on 22/10/2013 04:18:40 PM

    Typical Gratten Institutue leftist rubbish. Any substantial change to the way property is taxed will destroy what is a relatively pure market, and play havoc with other investment markets artificially forcing the share market up.

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