The residential building industry is being weighed down by excessive and inefficient taxation, beyond just Stamp Duty, says the Housing Industry Association (HIA).
In some states the total tax bill amounts to over 40 per cent of the final price of a new home, taxes on new housing are a brake on economic activity, and represent a constraint on housing affordability and labour productivity.
There is no question that Stamp Duty is one of the key offenders, with research undertaken last year for HIA by Independent Economics identifying it as is the most inefficient tax in Australia’s entire taxation system. As a tax on moving, it discourages households from relocation when this decision may better suit their needs in terms of size, location or employment opportunities. Unfortunately, the economy and the community do not get the best use out of the available housing stock. “However, there are many other taxes on new homes including developer infrastructure levies, which can be over $70,000 on a new house and land package, and which unfairly require new home buyers to fund community assets upfront.
Equally, GST is levied on new homes but not existing properties. Adding tens of thousands of dollars on a new home, GST creates a price differential between new and existing residential properties, which hits affordability, supply, employment and economic activity. Affordability is further eroded by the cascading effect of ‘taxing taxes’, whereby a tax such as stamp duty is levied on an amount that already includes a range of other costs. GST on infrastructure levies alone can add more than $5,000 to the final cost of a new home, while stamp duty on the total GST adds around $3,000. Infrastructure charges, GST and stamp duty add $140,000 and more to the cost of a new home in Sydney, while a plethora of other taxes, levies, fees, changes, rates and duties take the total tax grab to over 40 per cent of a new house and land package.
Taxes add more than $250,000 to the price of a new home in Sydney, accounting for 40 per cent ($1,350 per month) of repayments for the life of a home mortgage. Incredibly, in supplying shelter for Australians, residential building contributes 13 per cent of all GST revenue collected by the Commonwealth. Sadly, that taxation revenue drives up the cost of housing.
