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Addiction to property
Released 23 August 2011

By Tim McKibbin, REINSW CEO

There is a chronic housing shortage in Australia, particularly in Sydney. If we are to address this, governments at all levels need to move away from their dependency on property taxes.    

You don’t need to be an economist to understand why housing has become so unaffordable. Australia’s taxes on property are crippling housing supply, for owner occupiers and tenants alike.

Residential property needs to be recognised for what it is – a necessity of life and not a taxing opportunity. It should not be subject to land tax or stamp duty or other taxes, whether owner occupied or tenanted.

We are about to have a national forum in October to review the effectiveness, efficiency and equity of Australia’s tax system. Propositions such as increasing land tax to abolish stamp duty are like suggesting we rob Peter to pay Paul. It doesn’t shift the burden of tax borne by property.

Listed equities and other assets escape land tax and stamp duty, while property is a sitting duck.

Singling out property for additional taxes is simply inequitable.

Even the NSW IPART Report on the Review of State Taxation in October 2008 stated (at page 46) that NSW land tax “scores relatively poorly for equity, simplicity and transparency”.

Stamp duties have long been widely acknowledged as inefficient. They are a disincentive to buy property and distort investment decisions. The rates are intolerably high and the need for reform is urgent.

The tax forum is a great opportunity. However, it is ludicrous not to include the GST in the discussion. GST is the backbone of the original Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations and remains integral to the current IGA. Australia cannot afford to exclude it.