South Australian Taxation Review – Property Council of Australia’s response to discussion paper.
It is clear there is a need for urgent, fundamental tax reform in South Australia and nationally. Reform to property-based taxes are a critical part of this process. Property in South Australia (and Australia generally) is heavily taxed – 42% of State revenues come from property taxes. This is of concern for a number of key reasons
– Over half of all Australia’s household wealth is in property.
– Home ownership rates are in decline, and younger people are being locked out of the market.
– Transactional property taxes dampen the economy and jobs creation.
– Half a million South Australians have investments tied to superannuation funds, which include property investments.
– We need to encourage investment in South Australia.
If South Australia’s property taxation rates continue to be comparatively high this has an impact on growth and jobs creation in the state.
State revenue bases are steadily eroding to the point of unsustainability and there is instability inherent in revenue sources that rely too much upon transactional taxes. There is also an opportunity for South Australia to use tax reform as an economic driver to encourage greater investment in the State.
The Property Council of Australia supports South Australia undertaking an inter-governmental approach to tax reform. The Federal Government has recently opened a national tax reform debate through its publication of a discussion paper as part of its White Paper on the Reform of Australia’s Tax System. South Australia is uniquely placed to take a leadership role in this intergovernmental process given it has already commenced a State-based reform process.
Inefficient taxes act as a handbrake on the economy – impeding transactions, stifling activity, inhibiting job growth and constricting productivity. Replacing inefficient taxes, such as stamp duty, with more stable and efficient revenue sources, such as broad-based taxes is a crucial step toward improving the economic wealth of the nation. Abolishing stamp duties would mean replacement revenues would need to be provided to fund necessary state government services. The most obvious solution would be to broaden and increase the GST, but the Property Council welcomes engagement on other revenue options.
South Australia if it “goes it alone” on tax reform must carefully consider the best tax mix and potential perverse outcomes from any reform, as a simple land tax/stamp duty switch may not work, as it can result in penal property taxation rates, which drive away property investment – the opposite of what the South Australian economy needs.