Industry bodies have this week ramped up demands for a more holistic approach to negative gearing and capital gains tax on property.
The Real Estate Institute of Australia (REIA), Master Builders Association (MBA) and the Housing Industry Association (HIA) are asking government bodies to have a clear understanding of the economic impacts of changes to current arrangements for property taxes.
HIA’s Principal Economist Tim Reardon suggested this is not the appropriate time in the housing cycle to increase Capital Gains Tax.
“Increasing the tax on housing will result in less investment in housing, fewer houses being built and inevitably a worsening of the affordability challenge”, Reardon said.
“We cannot tax our way out of the housing affordability problem. The solution is less tax on housing and less government distortions on the market, not more.”
The HIA recently published research by CIE, showing that an increase in capital gains tax (CGT) would result in a $1bn reduction in revenue to state Governments, increase the cost of renting and exacerbate the housing affordability challenge.
“The analysis shows that increasing CGT would generate a revenue gain for the Federal Government of $0.5bn a year which would be dwarfed by stamp duty tax losses to the states in excess of $1bn per year”, he explained.
REIA President Malcolm Gunning remarked that the research highlights the significant contribution that the property sector makes to growth in the Australian economy.
“Australia’s property industry including new home building has been a crucial support to economic growth and increased employment in the transition away from a decade-long reliance on mining”, Gunning said.
“The property sector is one of the largest sectors in the Australian economy in terms of employment, GDP and investment. It is also one of the most heavily taxed sectors with research by HIA showing that the average tax burden on the new housing sector is around 30 per cent of the value.
“If we are serious about addressing housing affordability we need to take a holistic approach by looking at all taxes and charges impacting on the final cost of housing. We cannot just tinker with one or two that are ‘easy fixes’ without fully considering the consequences.”
Gunning suggested the government needs to be looking at supply-side solutions including streamlining planning processes and reducing extra taxation on homebuyers such as stamp duties.
“Improved infrastructure such as public transport to employment hubs which encourage decentralisation to more affordable suburban and regional areas should be considered.”
He concluded by proposing the appointment of a Minister for Property Services, who would co-ordinate a ‘holistic approach of all levels of government in objectively addressing all property taxes’.