This article is from the Australian Property Journal archive
The dependence of States and Territories Governments on property taxes is adding five years to the average Australian home loan, according to the HIA.
According to the HIA property taxes are adding as much as $125,000 to the cost of a new house in Sydney where the median house price is $555,000.
The Hendy Warburton report found that that Australia has the highest reliance on transaction taxes, such as stamp duty, of any country within the OECD.
The most significant category of these taxes is stamp duty on property.
HIA’s managing director Ron Silberberg said that for far too long state governments have treated property as a cash cow to fund their budgets.
“Home owners are subsidising state revenue to the tune of billions of dollars through transaction charges and bloated mortgages.
“The growth in local and state government taxes and charges on new housing has devastated housing affordability,” he added.
After GST, revenue from housing taxes provides the biggest source of tax receipts for most state governments.
In 2003-4 the states and territories collected more than $10.47 billion in stamp duty and more than $3.059 billion in land tax.
The growth of local and state taxes and charges on new housing is further inflated by stamp duty which is levied on all taxes and charges, including GST, and is imposed at three stages:
1. Sale of land to the developers
2. Sale of land from the developer to the builder; and
3. Sale of house and land package to the purchaser.
“Purchasers of new homes believe they’re only paying stamp duty once on the final purchase price.
“In reality, the final purchase price includes stamp duty levied on a range of taxes, compounded at each stage by the collection of that stamp duty,” Dr Silberberg said.
For example, stamp duty levied on taxes and charges applicable to new houses in Sydney may add $20,000 to the final price, this may mean an extra five years of home loan repayments.
“There is clearly a need for states to employ an input tax credit system for stamp duty, similar to that used for the GST, to ensure that stamp duty is not calculated on other taxes and charges.
“The current practice used to collect stamp duty on new housing involves triple counting, is inequitable and amounts to nothing more than a state government revenue rort, as the Warburton and Hendy Report shows,” Dr Silberberg concluded.
The HIA said aside from an immediate review of property taxation, it is calling for cuts to Australia’s top marginal tax rate, further reductions in the burden of Capital Gains Tax, and for States to abolish all the taxes that were included in the 1999 GST agreement.
By Adam Parsons
