HIA demands tax relief for new housing ahead of tax summit

Ahead of the October Tax Forum, The Housing Industry Association has demanded drastic measures at both federal and state levels to cut housing taxes.

The industry body points to research by the Centre for International Economics that has found that residential building is the second most heavily taxed sector in Australia in relative terms (after retailing), with the average tax burden estimated at around 31% of the value of output compared with an economy-wide average of 24.4%.

New housing contributes more than twice as much in government taxation revenues (2.8%) as it does in value added to the economy (1.2%).

Sydney home buyers are feeling the brunt of the tax burden, paying an estimated 44% or $268,000 of the purchase price in taxes, followed by Melbourne buyers (38%, $184,000) and Brisbane (36%, $191,000) buyers. 

About 40% of the tax bill is made up of what the CIE classifies as “hidden and ambiguous taxes” including the “excessive portion” of infrastructure charges and the cost of meeting “overly stringent” minimum energy efficient ratings. 

Direct taxes – stamp duty, land taxes and GST – make up 28% of the tax bill while indirect taxes – taxes on resources: capital, labour and land – account for 32%. 

Stamp duty, which is levied at a state level, is deemed the most inefficient tax, according to the CIE report, which estimates that cutting stamp duty by $500 million would create a $738 million benefit to consumers and up to a $51 million benefit to producers.

Overall, the CIE report say policy action to remove or significantly housing taxes will “pay big dividends in terms of improved efficiency, faster growth and increased housing supply”. 

“It’s time to recognise and act on the fact that the tax burden on new housing in Australia is excessive,” says HIA managing director Shane Goodwin. 

“We’ve got to the point where the tax on a median new Sydney home is over $260,000, and it’s clear the type of impact this is having in terms of decreased affordability and constrained housing supply.” 

According to the HIA, the tax forum presents an opportunity for the Gillard government to put in place the foundation for a strong taxation reform agenda that will not only boost productivity and growth, but can help address policy issues such as Australia’s large and growing housing affordability problem.