FHBA Petition Explained: Point 4. Changing the Land Tax system

Last week we discussed the first 3 points of our 5 Point Plan to address housing affordability. These points explained our recommendations to the Australia Government in relation to interest tax deductions/negative gearing, Capital Gains Tax (CGT) and Stamp duty reductions. You can view our earlier recommendations by clicking here:

FHBA Petition Explained: Point 1. Reduce Interest Tax Deduction for Investment Properties

FHBA Petition Explained: Point 2. Introduction of a tiered CGT Discount System

FHBA Petition Explained: Point 3. Reduction of Stamp Duty for First Home Buyers

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As per our 5 Point Plan petition that we launched late last year, our third recommendation to the Australian Government relates changing the Land Tax system to create a more level playing field for first home buyers:

Change the land tax system from value based, to property number based. Land tax would apply from property no. 3 +, except from property no. 1 for foreign investors. This would also assist first home buyers with the obstacle or upfront costs involved with getting into the property market. We also believe first time investors or Australian’s fortunate enough to purchase a holiday home, should not be punished from a tax perspective. If foreigners want to invest in Australia then they should pay appropriate tax from property no 1.

Lack of taxes and fees for foreign investors has allowed many foreign investors to purchase properties in the last few years, putting upwards pressure on property prices in Australia. The introduction of Land Tax on any property a foreign investor holds will somewhat deter foreign investors buying homes in Australia (i.e. so they don’t over invest in Australia). For local investors, our recommendations won’t penalise those that are looking to buy one investment property on top of their owner occupied home, however if you are looking to build a portfolio of 2 or more investment properties, we believe these fortunate Australians should be required to pay land tax from property number 3 regardless of any thresholds that currently exist in each state.

Based on feedback we have received on our policy recommendations, Land Tax would also apply on singular properties where the property value is above a certain threshold. E.g. $1,000,000. According to the ABS housing finance statistics in 2015, the average first home buyer property value was around the $400,000 mark, so most first home buyers won’t may a cent in Land Tax under our proposal.

Recently the concept of replacing the stamp duty tax by a land tax has been an issue of ongoing debate. Just a few days ago, the Australian Council of Social Service recommended the States that agree to swap stamp duties for land taxes for all properties should be given financial support by the Federal Govt. Whilst FHBA aren’t currently supporting the ACSS’s recommendation, we are happy to see this important debate taking place.

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 We see the following benefits arising if our recommendations around Land Tax were instated:

  • A more level playing field for first home buyers, because investors will now have to factor in mandatory Land Tax expenditure when deciding to invest in more than one property.
  • It could improve housing affordability as we recommend foreign investors are taxed on every property they purchase (without any threshold), as the high costs of maintaining a property could act as a deterrent to over investing in Australian real estate
  • This recommendation still allows Australians to build some wealth through property as the first investment property purchase will be exempt from any land tax charges.

Stay tuned for our discussion of our last point (Bringing back the First Home Savers Account with enhanced features!) of our 5 Point Plan.

You can view the summary & show support for our 5 Point Plan here.

 

 

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