Report slams government's housing approach: Get rid of stamp duties, now

by 21 Oct 2013

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 $40b 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.

COMMENTS

  • by Davo 21/10/2013 10:34:51 AM

    I honestly don't follow the logic of these types of arguments. Investors accept operational losses in lieu of tax concessions and capital gains, effectively subsidising rent.

    In an environment where there were losses are not tax deductible and little prospect of a capital gain the only incentive left for the Investor would be an operational profit, which of course means much higher rent.

    Whilst this may benefit some first time buyers, there is always going to be a large percentage of the population who can't or don't want to buy and they will be far worse off.

  • by mac 21/10/2013 11:48:18 AM

    I don't follow your logic Davo. Why is it that you think Landlords would be able to just lift rents in this scenario? I would have thought logically that they wouldn't be able to raise rents as there would be less renters around due to the transfer of unwanted investment property stock making a loss being sold to new buyers. Don't forget the number of properties doesn't change materially so they are either PPR or investments. ps I want this to happen but in an orderly fashion over say a 10 year phase out period.

  • by Papery 23/10/2013 1:23:40 PM

    Most investors I ve come across subscribe to theory that they should start lifting rents as soon as the lease come up for renewal, they also expect the big tax refund each year AND they expect to flip the property at some time in the future for a great profit.