Why Australian home owners still face higher property taxes?

Why Australian home owners still face higher property taxes?
Why Australian home owners still face higher property taxes?

Despite the rejection of Labor's dangerous negative gearing tax experiment, there is no doubt property owner occupiers and investors face the prospect of an uncertain policy horizon.

Inevitably there will be higher taxes and fewer concessions in the years ahead.

All Federal governments, Coalition or ALP, along with state governments and local councils have become over reliant on the revenues from the property owning class.

Despite the continuing price downturn, recent ABS data highlighted their dependancy. Total NSW property tax revenue in 2017-18 was $8.3 billion in NSW.

Across Australia state and local governments collected more than $30 billion in taxes in 2017-18 – which was $9 billion higher than five years prior.

Cameron Kusher from CoreLogic did some analysis indicating it was five percent higher over the year, slightly slower than the eight percent prior year increase.

Land taxes ($9.153b) increased nine percent over the year and municipal rates ($18.4b) were up four percent.

Local government relies exclusively on property taxes, while state governments secure around 14% of their tax revenues from property.

These figures don’t include the property’s contribution through payroll taxes, and the Federal government's company tax, capital gains and GST.

As taxes such as stamp duty are inefficient, restrictive, and responsible in part for boosting housing prices, there's likely to be the need for comprehensive reform.

This will likely see a wider net of revenue raising across all property owners.

Presumably any reform will need to be discussed away from heated election campaigns seeking a bipartisan approach to come up with not just the right policy, but genuine grandfathering and the best time for introduction.

The recent campaign saw Bill Shorten attacking “vested interests” waging a “scare campaign” against his negative gearing policy pinpointing "real estate agents defending their commissions.” 

Unlike the subdued criticism during the 2016 boom time election, the Shadow Treasurer Chris Bowen hit huge headwinds given the property market confidence was in decline.

Commentators including Peter Switzer were loudly suggesting the policy had the potential of sending property prices off a cliff on its January 2020 introduction along with seeing rents rise for tenants.

Mr Bowen's comments around negative equity didn't assist his case.

Defending the plan to scrap negative gearing entitlements for many would-be investors, Mr Bowen spoke on his own brush with negative equity.

“I mean sometimes lots of people go into negative equity when the housing market does fall," Bowen said.

“I remember when I first was in the housing market I went into negative equity for a while. You look at it carefully, but unless you actually sell, then you haven’t actually lost any money. The market does come back.”

Bowen had bought at Smithfield, in Sydney’s west, paying $470,000 in boom time May 2003. It was at the market peak, ahead of the 2004 crash. By mid-2004, Bowen was busy building a two storey home.

His negative equity comments were picked up by commentators as having “dubious logic," but Bowen dismissed the backlash saying homeowners were concerned their children and grandchildren got a fair go when they turned up at auctions and competed with investors.

The deputy Opposition leader Tanya Plibersek suggested first-home buyers needed to be shielded from investors buying their “30th investment property.”

It vastly overstated the investment landscape as 70 per cent of Australians who negatively gear own just the one property.

According to the Australian Taxation Office, less than one percent of the nation’s 1.3 million negatively geared investors own six properties or more.

This article first appeared in The Daily Telegraph.

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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