Taxes and red tape imposed by all levels of government account for up to half the cost of a new house-and-land package, according to new research by the Centre for International Economics.
The research commissioned by the Housing Industry Association found that 10% of all government revenue is raised from taxes on housing. The HIA says the cost is as high as 50% of a house-and-land package in Sydney, 37% in Melbourne, and around 33% in Brisbane, Perth and Adelaide.
“It is unacceptable that the red tape and tax incurred in the construction of a ‘house and land’ package as a percentage of the purchase price is 50% in Sydney and 37% in Melbourne, as outlined in this report,” Federal Housing Minister Michael Sukkar says. “It is also unacceptable that the supply of new housing is so badly constrained by state and territory planning and regulatory bottlenecks.”
HIA executive director NSW David Bare says the tax imposts on housing have constrained housing supply and driven escalating house prices. “Over the ten years it takes to produce a house and land package there is a long and cascading list of red tape and taxes that account for half of the cost of the new house and land package in Sydney,” he says.
“Housing is one of the most heavily taxed sectors of the economy alongside the ‘vice taxes’ applied to cigarettes and alcohol.
Government imposts include stamp duty on the land and the house; GST; land tax; council rates; payroll, income and company taxes – which, combined, raise almost $180,000 in taxes on a typical new house-and-land package.
“This does not include the additional $40,000 in development charges or the $220,000 incurred in red tape,” Bare says. “Soil testing, native vegetation protection, contamination reports, heritage assessments, bushfire assessments, road access fees, traffic management fees, site inspection fees, building levies, connection fees, energy reports and flood assessments are just some of the cascading costs and delays that push up building costs.”
The Property Council of Australia has urged the State Government to review stamp duty as new analysis reveals Melbournians would need to save on average for 13 years just to cover stamp duty expenses.
With the average Australian saving roughly 6% of their total income, skyrocketing stamp duty is making it more and more challenging for buyers looking to move or upsize.
According to Cressida Wall, Victorian Executive Director, Property Council of Australia, the problem for Victorians is that stamp duty brackets haven’t been reviewed for over 10 years, whilst house prices have continued to balloon, significantly increasing the rate of duty payable.
“Stamp duty has increased by 17.9% as a percentage of yearly income in the last 5 years. This means the average Melbournian now has to pay, on average, an additional 9 weeks of salary to cover the inflating cost of stamp duty,” says Wall.