Nothing is certain but death and taxes. Thankfully we no longer experience both at the same time thanks to the abolition of death duties in the 1970s. But government still maintains a preference for taxing things that don't move and the easiest stationary target is the property industry.
Property is the single largest industry contributor to government coffers in Queensland. The sector pays $9.9 billion per annum through State taxes and local government rates, fees and charges – shouldering 49.8% of Queensland’s total tax burden. This extraordinary level of property taxation not only impacts on housing affordability, but stifles industry investment and damages jobs growth.
Economic development is being thwarted, not only by the scale of the industry’s tax burden, but the inefficient nature of these taxes. Stamp duty, car parking levies, emergency services levies and insurance duties are just some of the distorting taxes still being heavily relied on by governments across the country to fund general expenditure.
Stamp duty’s adverse impacts deserve particular attention in this debate.
Many consider stamp duty a one-off-tax, but the impact of the fee over the life of mortgage can be considerable. The purchaser of an average Brisbane home in 2015, priced at $490,000, will pay $8,400 in stamp duty. But over the life of the mortgage will pay an additional $6,333 in interest on the tax. That’s a total cost of $14,733.
But the story gets worse. Stamp duty thresholds have not really changed in a generation. The result of this is an alarming amount of bracket creep. The stamp duty cost for a median house in Brisbane has risen by 632 per cent since 1995. Over that same period CPI has only increased by 171 per cent.
Taxes are meant to lean lightly on our economy, not act as a barrier to activity, transaction, job creation and prosperity, but that’s exactly what stamp duty does.
The property industry accounts for 11.4 per cent of Queensland’s economic activity, and directly employs 240,000 Queenslanders, more than manufacturing and mining combined. With this significant economic footprint it is not hard to see the lost economic potential that punitive taxation is inflicting across the sector.
The Federal Government’s impending Tax Reform Options Green Paper will trigger renewed debate on the future direction of Australia’s taxation system. Stamp duty is an inefficient, volatile tax that is unreliable for governments, and unfair on homebuyers. It is time for it to go as part of modernising Australia’s tax system.
The end result of a more efficient tax system will be economic growth and an overall increase in revenue for governments. Property may be a stationary asset, but the property industry is dynamic. With the right reforms, which bring our tax system into the 21st century, property can deliver the economic gains the nation is now looking for.