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One mid-tier firm has rejected minor knee-jerk reactions to the housing affordability issues hitting Australia's capital cities, instead calling for a holistic look at tax reform.
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Mid-tier calls for tax overhaul to address housing affordability
11 April 2017
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Ahead of Treasurer Scott Morrison’s address to the Australian Housing and Urban Research Institute yesterday, BDO national tax leader Marcus Leonard said that a holistic approach to tax reform in relation to housing affordability is required.
“The temptation is certainly there to tinker with the tax system and try and put downward pressure on rising housing costs,” Mr Leonard said.
“However, tax is too blunt an instrument on its own and shouldn’t be used as the main tool to enact change.”
Mr Leonard acknowledged that there have been a number of suggestions for tax and superannuation changes to relieve housing affordability, such as stamp duty reductions for first home buyers, withdrawal from superannuation funds for first home buyers and GST concessions for new residential housing.
“The concern with these suggestions is that without corresponding increases in supply of housing, the effect of these suggested changes would be to push prices up by the amount of the concessions. Therefore, on their own they may not have any substantial effect on housing affordability,” he said.
“However, if you look at the issue in a more holistic manner, there are some tax concessions that may have an effect on the supply of housing, and thus relieve some of the housing affordability issues.
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The first suggestion Mr Leonard made is to encourage decentralisation away from the main cities of the east coast, where job opportunities are greater.
“If governments were to encourage decentralisation of workplaces to less populated cities and towns, the demand for housing in these large cities may be reduced,” he said.
“There may be tax incentives that federal and/or state governments could provide to encourage this, such as reductions in payroll tax, land tax, stamp duty and CGT rollover relief for businesses and workers to relocate to such decentralised areas.”
Another factor restricting supply is the disincentive for homeowners to downsize when family members move out, according to Mr Leonard.
“The stamp duty on changing residences is now so high that many people are discouraged from moving to more appropriate accommodation, even though their family situation has changed,” he said.
“While the best option would be to remove stamp duty completely from residential housing, the provision of stamp duty concessions for older persons when they downsize their houses may have some effect in providing more supply to the system.”
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