
Last week’s Grattan Institute tax report was worth a read.
The Australian Government is nursing a structural deficit. $70 billion each year and growing.
The report is styled ‘A menu of measures to repair the budget.’ It contains proposals for reduced government spending and for hiking certain taxes.
Why does this matter to property? Turns out there are a large number of national revenue options you should try before taxing property.
Of the circa $70 billion of spending and revenue options the Grattan team advocate, the majority outrank negative gearing and CGT discounts as either greater “contribution to budget repair” or stronger “economic and/or social case”.
Among the biggest include petroleum related levies, super tax concessions, stage three tax cuts and of course raising the GST with a low-income safety net. The latter being one of the most efficient options available.
Our own research, conducted by Deloitte in 2019, shows that the central scenario of the original (and wildly unpopular) changes to the negative gearing and capital gains regimes applying to homes over ten years would be a drop in GDP of $1.5 billion and the loss of 7,800 jobs.
Why? Because less investment reduces economic activity and job creation.
From a construction point of view, property is one of the most potent economic growth ingredients we have in the economy.
Every $1 million spent on constructing property creates nine full time equivalent jobs.
From a state and territory government revenue point of view, property already provides 50 per cent of revenue in many states and territories.
Some, like foreign investor tax-on-taxes, should of course be axed completely. We need to lay out the national welcome mat for overseas investments.
Why make it harder for money from the Northern Hemisphere to fund the construction of our cities and infrastructure? Our cities have benefited from and in substantial part been built by this money for many decades and we should never take it for granted.
Most topically, residential property is already heavily taxed by the three levels of government. 30-40 per cent of the cost of every new Australian home is pure tax. If governments want to make housing cheaper – start reducing the taxes loaded into the cost of every new home. This includes stamp duties which are a direct handbrake on people’s ability to follow new job and life opportunities.
If our elected leaders seek to protect jobs and economic growth in uncertain times, the results are in.
Property, and the jobs it supports, is the last thing that needs more taxes piled upon it.