Australia’s residential construction industry is being weighed down by ‘excessive and inefficient’ taxation, an industry group says, with the total tax bill amounting over 40 per cent of the final price of a new home in some states.
The Housing Industry Association (HIA) has made that claim following the release of a report it commissioned from the Centre for International Economics (CIE).
The report says housing is the second most heavily-taxed of all large sectors in the Australian economy. It says taxes on the housing sector contribute $36-$40 billion toward the revenue base of federal, state and local governments in Australia, numbers that equate to around 11 to 12 per cent of total revenue collected by all tiers of government.
The report says that along with direct taxes, such as GST, stamp duty, land tax and council rates, the sector has to cope with indirect taxes (taxes on building and construction inputs) and hidden fees and charges.
In New South Wales, for example, these charges include long service fees and training levies, planning approval fees, residential development assessment fees, rezoning application fees, transfer fees, ad valorem transfer charges (based on the assessed value of a property) and subdivision fees.
Overall, the report says, when these hidden taxes are added in, the amount of tax paid levied on the average new home amounts to 44 per cent of the price of a new house in Sydney, 38 per cent in Melbourne and 36 per cent in Brisbane.
HIA Managing Director Shane Goodwin says the Commonwealth should lead the process of reforming and simplifying taxes impacting the sector at all levels. He has also called on the government to abandon its ‘surplus at all costs’ mentality.
Although he singles out stamp duty in particular, Goodwin says this is far from the only tax acting as a barrier to housing investment. He adds that while states and territories have to fund the services they deliver, this should be done through broad-based means which do not unduly penalise a single sector.
“Taxes on new housing are a brake on economic activity, and represent a constraint on housing affordability and labour productivity,” Goodwin says. “Reforming inefficient taxation on housing is an investment guaranteed to pay a dividend.”