Stamp duty and payroll tax are being blamed for dwindling new housing approvals in major Australian cities, which in turn is reducing housing affordability for new property purchasers, according to an advocacy group.
The Urban Taskforce Australia is calling for a stimulation of the residential development sector in Australia to accelerate new housing supply, drive better utilisation of existing housing and reduce the cost of new homes for first-time buyers.
CEO Tom Forrest is calling for stamp duty to be replaced by a broad-based land tax.
“Stamp duty, which is paid upfront when a property is transacted, reduces potential housing market transactions and limits the supply of existing homes for sale by deterring people from changing homes when they otherwise would, like empty-nesters looking to downsize,” he explained.
At the same time, Mr Forrest said it punishes first home buyers, who “can least afford to pay, by more than doubling the cost of most property transactions”.
The deterrence of transaction has an estimated loss of benefit to the community in the order of $375 million per annum, Urban Taskforce has flagged.
Mr Forrest cited analysis from the Grattan Institute, which found an annual flat rate tax of 0.05 per cent – or $5 on every $1,000 – on unimproved land value would be sufficient to fund the abolition of stamp duty in New South Wales.
According to the CEO, a broad-based land tax is less volatile than stamp duty.
It’s also “the only tax on property that keeps pace with economic growth”.
“It would facilitate infrastructure contributions from all of society that benefit from economic growth and general land value increases,” Mr Forrest considered, before noting it would also improve the utilisation of land – the largest single contributor to the price of housing.
Crunching the numbers, Urban Taskforce said the release of a “significant amount of under-utilised housing” could reduce house prices by around 6 per cent within a matter of years.
The removal of stamp duty is just one way that the taskforce proposes overhauling property tax in Australia.
Here’s its full list of recommendations: